A federal judge in the United States District Court for the Northern District of California in San Jose ruled that the Bureau of Land Management (BLM) failed to fully evaluate the potential impacts of hydraulic fracturing operations in granting oil and gas leases for approximately 2,700 acres of land over California's Monterey Shale Formation.  The court concluded that BLM violated the National Environmental Policy Act (NEPA) by unreasonably relying on a 2006 resource management plan and environmental impact statement governing management of the larger planning area encompassing the leases.  In the 2006 plan, BLM had determined, based on a survey of past oil and gas activities, that no more than 15 wells would be drilled in the entire planning area.  Using this figure to evaluate the impact of granting the leases, BLM assumed that no more than one exploratory well would be drilled on the leased land and concluded in an environmental assessment that granting the leases would result in no significant impact on the environment.

The court disagreed with BLM's analysis, finding that BLM failed to consider the impact of current fracking technology on the availability of oil from the Monterey Shale.  By relying on the 2006 plan, based on outdated technologies, the court concluded that BLM failed to take into account the "reasonably foreseeable" possibility that current technologies would lead to significantly increased oil production in the area of the leases.  Based on the current scale of fracking, BLM should have performed further environmental analysis to determined the "new and significant environmental impacts" associated with granting the leases. 

The court agreed with BLM that the impacts of fracking are largely unknown; however, it also found that this was "precisely why proper investigation was so crucial in this case."  But the court refused to issue a remedy at this stage, ordering the parties to submit a joint recommendation.  If the parties cannot reach agreement on a proposed remedy, each will argue their respective position for a final decision on the remedy.

The judge emphasized that the decision was not a determination regarding the environmental impacts of fracking, only that BLM failed to adequately consider such impacts under NEPA.  Nonetheless, this case does suggest that recent developments in fracking technologies have resulted in unknown and potentially significant adverse impacts to the environment.  This will certainly prompt increased environmental analyses of the impacts of fracking in the context of other federal, state and local authorizations and increase the time and administrative costs of obtaining such studies and approvals.