A federal court in California has overturned a Bureau of Land Management (BLM) decision to issue leases for oil-and-gas exploration without analyzing the potential impacts of hydraulic fracturing. Ctr. for Biological Diversity v. BLM, No. C-11-06174 (N.D. Cal. 3/31/13).

At issue were multiple leases in Monterrey and Fresno counties, sold in part under a 2006 BLM resource management plan for an area encompassing more than 800,000 acres. The plan did not consider the possibility that hydraulic fracturing might occur or affect the operations on any property leased for oil-and-gas exploration. BLM concluded, based on past experience, that no more than 15 wells would be drilled on the entire acreage during a 15-20 year period. BLM also claimed that it would be premature to assess hydraulic fracturing and that the right time to assess extraction methods is when lessees seek drilling permits.

When BLM decided to issue the leases, it performed an environmental assessment (EA) and issued a finding of no significant impact under the National Environmental Policy Act (NEPA). Although commenters suggested that the EA should analyze hydraulic-fracturing effects, BLM took the position that those effects were beyond its jurisdiction and declined to do so. After the leases issued, multiple entities sued, claiming that a full environmental impact statement (EIS), including an analysis of the effects of potential hydraulic fracturing, was a prerequisite to selling the leases.

The court agreed with BLM that for some leases, which expressly prohibited any use of the surface of the leased property without further BLM approval, did not require an EIS. But the court held that leases lacking this prohibition constituted enough of a commitment of resources to require the requisite hard look of an EIS under NEPA. Despite past experience and the lack of current hydraulicfracturing operations on federal lands nearby, the court held that increased oil-and-gas interest in the area, coupled with increased hydraulic fracturing in general, made its possibility a sufficiently foreseeable indirect effect of the decision to enter the leases to require its assessment under NEPA.

The court observed, “BLM plainly limits its analysis to one scenario – a lessee drills an exploratory well, no oil is found, and the lessee halts all further exploration. While this may have been reasonable in the past, the record before the agency teaches that it was not reasonable by the time the . . . leases were issued.” Issuance of the leases, according to the federal magistrate, opens a “reasonably close causal relationship” to the possibility that hydraulic fracturing will occur under the leases.