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New Mexico’s Mancos Shale Development: “Go Ahead” to BLM on Oil and Gas Well Approvals is Affirmed by the U.S. Court of Appeals

December 28, 2016
By Walter E. Stern

On October 27, 2016, the U.S. Court of Appeals for the Tenth Circuit issued its opinion in Dine’ Citizens Against Ruining Our Environment et al. v. Jewell, Tenth Circuit Cause No. 15-2130, affirming the decision of the Honorable James Browning which rejected the environmental non-government organizations’ (“NGOs”) claims that the U.S Bureau of Land Management (“BLM”) had violated the National Environmental Policy Act (“NEPA”) when approving certain applications for permits to drill submitted by oil and gas companies seeking to explore and develop the Mancos Shale in the San Juan Basin of northwestern New Mexico. In the process, a majority of the Tenth Circuit panel tightened the Tenth Circuit’s standard for issuing preliminary injunctions based on its reading of the U.S. Supreme Court’s decision in Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008).

The Mancos Shale in New Mexico’s San Juan Basin has been the focus of both oil and gas exploration and development activities in recent years. The BLM had been approving individual Applications for Permits to Drill (“APDs”) for well drilling in accordance with a 2003 Amendment to the Farmington Resource Management Plan (“Farmington RMP”) which included a “reasonably foreseeable development scenario” or “RFDS” predicting an estimated 9,970 wells would be drilled in the planning area over the ensuing 20 years, 3,988 of which would be gas wells drilled in the Dakota/Mancos formations and 180 of which would be oil wells drilled in the Mancos shale.

Following issuance of the 2003 RMP Amendment and final Environmental Impact Statement (“EIS”), on receipt of an APD, the BLM had prepared individual environmental assessments (“EAs”) to assess the environmental impacts of each proposed well. In preparing the EAs, the BLM would “tier” from the 2003 Final EIS. “Tiering” is an approved method for complying with NEPA. The U.S. Department of the Interior’s NEPA regulations expressly address the manner in which one NEPA document can “tier” from another. See 43 C.F.R. §46.140(c), which provides in part:

An environmental assessment prepared in support of an individual proposed action can be tiered to a programmatic or other broader-scope environmental impact statement. An environmental assessment may be prepared, and a finding of no significant impact reached, for a proposed action with significant effects, whether direct, indirect, or cumulative, if the environmental assessment is tiered to a broader environmental impact statement which fully analyzed those significant effects.

“Beginning in about 2014, the BLM began receiving more APDs than anticipated for oil wells in the Mancos Shale,” according to the Tenth Circuit. See Mem. Op. at 5. The increase in applications was attributed to technological advances making it economical to drill horizontal wells into the Mancos and conduct multi-stage fracturing activities in lieu of more traditional vertical wells. Id. at 5-6. As a result of the increased interest in Mancos Shale drilling, the BLM prepared a new Reasonably Foreseeable Development Scenario (“RFDS”) and began work on a further amendment to the Farmington RMP to account for the increased estimates of Mancos Shale gas and oil well development. Id. at 6.
In March, 2015, Dine’ CARE and other environmental NGOs filed suit against Secretary of the Interior Sally Jewell, the BLM, and its Director alleging the BLM was violating NEPA and challenging the issuance of 260 APDs in the Mancos Shale. The Plaintiffs then sought a preliminary injunction “to prevent drilling on approved wells while [the] litigation is ongoing.” Id. The district court denied the application for a preliminary injunction, concluding that the Plaintiffs had failed to meet their burden to show three of the four elements or requirements to obtain preliminary relief. Judge Browning concluded that: (a) the Plaintiffs were not likely to succeed on the merits of their claims; (b) the environmental harm alleged by the Plaintiffs was outweighed by the economic harm to oil and gas operators; and (c) the public interest would not be served by preliminary relief. See Id.
On appeal, the Tenth Circuit considered only the first part of Judge Browning’s opinion: Whether the NGOs had presented a sufficiently strong case on the merits to justify entry of a preliminary injunction. The three-judge Tenth Circuit panel concluded that the NGOs had not made a sufficient showing on the merits and chose not to address the other bases for rejecting injunctive relief that Judge Browning had addressed.

Importantly, two of the Tenth Circuit Judges held that the U.S. Supreme Court’s decision in Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), rendered portions of the Tenth Circuit’s authority on the standard for preliminary injunctions inconsistent with the Supreme Court’s ruling. In Winter, the Supreme Court reversed a Ninth Circuit Court of Appeals ruling that applied a more relaxed standard for the irreparable harm element of preliminary relief when the plaintiff demonstrated a strong likelihood of success on the merits.

The [Supreme] Court held that the Ninth Circuit had impermissibly deviated from the Supreme Court’s “frequently reiterated standard” for preliminary relief, which requires a showing of a likelihood of harm, and permitted a more lenient standard of relief “inconsistent with [the Court’s] characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.

See Memo Op. at 10, citing Winter, 555 U.S. at 22. Two judges on the Tenth Circuit panel went on to conclude that the lesson or “rationale” of Winter means that “any modified test which relaxes one of the prongs for preliminary relief and thus deviates from the standard test is impermissible.” Id. at 10-11.¹

We accordingly hold that the district court did not abuse its discretion in simply applying the Supreme Court’s “frequently reiterated standard” for preliminary relief, including the requirement that the plaintiff must show he is likely to succeed on the merits.

Id. at 11.

Applying this standard, the Tenth Circuit rejected the NGOs’ claims that “the new horizontal drilling and multi-state fracturing techniques being applied in the San Juan Basin will lead to harm of a greater magnitude than was anticipated when the BLM drafted the 2003 RMP.” Id. Specifically, the NGOs asserted that these techniques would result in greater surface impacts, air pollution emissions, and water consumption. And, the NGOs asserted that the impacts were of a different nature or type of impact or harm than had been evaluated in the 2003 Final EIS. The Court of Appeals concluded that the NGOs had not presented sufficient evidence to support their claims, particularly given the deferential standard of review the courts apply to agency decisions. Id. at 11-15.

Finally, the NGOs argued that the BLM’s decision to prepare a new RFDS and to propose a further revision to the Farmington RMP demonstrated that BLM had acted arbitrarily in continuing to issue APDs using EAs tiered from the 2003 Final EIS. This argument was also rejected: “The agency’s decision to improve its plan for managing federal lands in the San Juan Basin does not immediately invalidate the old plan or prevent the agency from referring to it.” Id. at 16-17. Disagreements with agency decisions do not equate to a determination that an agency abused its discretion or acted arbitrarily.

The decision in Dine’ CARE v. Jewell is a victory for BLM and the oil and gas industry by upholding BLM’s decision making regarding the grant of APDs for development of the Mancos Shale based on the 2003 Final EIS even as the BLM is seeking to update that NEPA document based on increased activity and interest in the Mancos Shale. The opinion also seeks to harmonize Tenth Circuit standards for preliminary injunctive relief with recent Supreme Court precedent, confirming that preliminary injunctions are indeed to be issued only in extraordinary circumstances. At the same time, comments in the opinion clearly reflect that the courts will continue to scrutinize closely NEPA challenges to agency decision making. Moreover, Dine’ CARE and its companion NGOs have demonstrated ongoing tenacity in their efforts to ensure that federal agencies comply with their statutory and regulatory obligations regarding the fossil fuel economy in New Mexico and beyond.

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