In a ruling that could affect virtually every well drilled in the past 45 years across Osage County, a federal judge has invalidated an oil and gas lease for not including a site-specific environmental assessment.
The lawsuit, Hayes v. {span}Chaparral Energy and the U.S. Bureau of Indian Affairs, specifically mentions only one lease and two drilling permits. But it could serve as a test case for a pending class-action lawsuit that, if decided the same way, would have a much wider impact.
Both cases involve the National Environmental Policy Act and whether it requires the BIA to consider the potential environmental impact of each specific well site. The BIA has generally granted drilling permits based on an environmental assessment of the whole county conducted in 1979, but U.S. District Chief Judge Gregory Frizzell ruled that the countywide assessment is too generic and outdated to satisfy the law.
“Unlike 1979,” the judge wrote, “today virtually every drilling operation in Osage County involves hydraulic fracturing.”
The logic of this ruling, if applied to a 2014 class-action lawsuit known as the Donelson case, could invalidate nearly every lease signed since NEPA was enacted in 1970, said attorney Donald Lepp, who is representing the plaintiffs in both cases. Although, as Lepp noted, the courts will also have to decide whether a statute of limitations would protect leases signed more than several years ago.
“The BIA ignored its duties under NEPA when it approved the lease and drilling permits,” Lepp told the Tulsa World. “As virtually every lease and permit approved by the BIA in Osage County were handled similarly, the ruling will have impact beyond just this case.”
This week’s ruling poses yet another problem for an Osage oil industry that has been in turmoil for more than a year. The BIA, partly in response the Donelson class-action lawsuit, has made it more difficult and time-consuming to get drilling permits, and producers took the BIA to federal court to block stricter environmental standards that they say would have made oil production virtually impossible in the county.
If BIA regulations haven’t been in compliance with NEPA, oil producers aren’t to blame, said Jamie Sicking, an attorney for the Osage Producers Association.
“The real bad actor here again is the BIA,” he said. “The producers have to trust that the BIA is doing their job correctly.”
Sicking finds hope for the future of the Osage oil industry in one of the judge’s footnotes, acknowledging that federal regulators could go through the process of issuing a “categorical exclusion” for the county, relieving at least some of the environmental burdens imposed by NEPA. But in the meantime, “we’re all caught in a very scary situation right now,” he said.
BIA officials could not be reached for comment.
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