CBM Leases in Powder River Basin Held Illegal
WOC Victory Attracts National Attention

by Tom Darin

In April, the Department of Interior Board of Land Appeals (IBLA) ruled that three oil and gas leases in the Powder River Basin sold to industry to extract coalbed methane were issued in violation of federal law. The decision came two years after WOC and the Powder River Basin Resource Council challenged these leases.

The ruling, which sets the first legal precedent on oil and gas leases used for coalbed methane (CBM) development, sent shock waves through the CBM industry and attracted national media coverage.

Why all the fuss over the IBLA ruling? In addition to dealing a major blow to the Bush Administration's national energy policy, the decision arguably calls into question the validity of millions of acres of federal oil and gas leases in the West, which, according to news reports, has federal officials "stymied" over what to do next.

Invalid & Illegal Leases

The National Environmental Policy Act (NEPA) requires federal land-management agencies to carefully consider the unique impacts of CBM extraction before selling leases to industry. The basis of our successful legal challenge was that the only pre-leasing NEPA document for the Powder River Basin was an outdated Resource Management Plan still being used by the Bureau of Land Management (BLM). The 1985 study does not even mention, let alone analyze, CBM development in the basin, which industry now considers the hottest natural gas play in the United States.

Deputy Chief Judge Bruce R. Harris of IBLA ruled that oil and gas leases are invalid and illegal when the leasing "[is] based on existing environmental analyses which either did not contain any discussion of the unique potential impacts associated with coalbed methane extraction and development or failed to consider reasonable alternatives relevant to a pre-leasing environmental analysis." IBLA rejected the BLM's argument that environmental-impact studies of conventional deep natural gas exploitation were sufficient to cover the unique impacts of CBM development.

The Ripple Effect

In response, the BLM announced that it will refrain from selling oil and gas leases in the Powder River Basin, pending further consideration of the IBLA ruling. The potential ripple effects of our victory are enormous, since the BLM is currently analyzing the impacts of drilling up to 51,000 CBM wells on approximately 4 million acres of federal oil and gas parcels in the basin.

The troubling reality for the BLM and industry is that the supporting NEPA analysis for nearly every single acre of proposed CBM development in the basin is the same outdated 1985 Resource Management Plan (RMP). Therefore, existing leases covering millions of acres in the basin are potentially illegal and subject to a challenge in federal court to invalidate them.

The decision has major implications for CBM development throughout the West. Most federal CBM development in Utah, New Mexico, Colorado and Montana is occurring in areas where leases were sold under nearly identical RMPs completed in the late 1980s and without discussion or mention of CBM and its unique impacts.

When the legal requirements are the same (meeting NEPA provisions) and a court is presented with the same facts (an outdated RMP), the conclusion is obvious: serious trouble for the BLM and the CBM industry. WOC is considering its legal options, and may challenge existing leases in the Wyoming portion of the Powder River Basin on the same legal grounds.

National Media Coverage

Our precedent-setting legal victory and its implications for CBM development throughout the West attracted a blizzard of national media attention.

The New York Times reported that "The decision could affect wells on 40 million acres of public land in Colorado, Montana, New Mexico, Utah and WyomingÉ.Coal bed methane gas was a major component of President Bush's energy plan even before the Senate voted earlier this month to bar drilling in the Arctic National Wildlife Refuge. Since the vote, attention to the search for methane gas has intensified."

Time, The Wall Street Journal, The Washington Post, The Denver Post, The San Francisco Chronicle, AP, Reuters and dozens of regional newspapers in the Rockies spread the word in articles with headings such as "Ruling Could Delay Wyo. Gas Exploration," "Coal-Bed Methane Plan Has Setback: Interior Panel Rules Wyo. Leases Illegal" and "U.S. Board Kills BLM Methane Lease Approvals."

The Strangest of Lawsuits

Not unexpectedly, given the huge precedent this case may set for CBM development in Wyoming and across the West, industry is fighting back. As we go to press, Pennaco has just filed a lawsuit in the federal district court of Wyoming, challenging the IBLA decision.

WOC and other conservation groups will intervene in the case to preserve our victory, particularly since the plaintiff (Pennaco) and defendant (the BLM) agree with one another, claiming that the leases were legally sold. Considering the Bush Administration's "drill everything" energy policy, the BLM's support for Pennaco and, for more than two years, the BLM's claim that the leases are legal, we obviously face formidable opposition.

In the latest twist, the Interior Department's Minerals Division has filed a petition with IBLA judges asking them to reconsider their recent ruling. WOC will participate in that process as well to defend the legal principle that proper environmental analyses must occur prior to oil and gas leasing on our public lands.