Hayes v. Chaparral Energy, LLC et al
Filing
111
OPINION AND ORDER by Chief Judge Gregory K Frizzell The Court detemines that the BIA's approval of the Chaparral lease and drilling permits failed to comply with NEPA. The Court, therefore, declares the lease and drilling permits void ab initio. (lah, Chambers)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OKLAHOMA
DAVID P. HAYES, TRUSTEE FOR THE
PAUL B. HAYES FAMILY TRUST,
DATED APRIL 30, 2010,
Plaintiff,
v.
CHAPARRAL ENERGY, LLC, and
UNITED STATES OF AMERICA;
DEPARTMENT OF INTERIOR;
BUREAU OF INDIAN AFFAIRS,
Defendants.
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Case No. 14-CV-495-GKF-PJC
AMENDED OPINION AND ORDER
The National Environmental Policy Act (“NEPA”) is a process-oriented statute, requiring
federal agencies to consider the environmental impacts of their actions. This case involves a
dispute over the government’s obligations under NEPA with regard to its approval of an oil and
gas lease and two (2) drilling permits in Osage County, Oklahoma.
In 2013, Chaparral Energy, LLC (“Chaparral”) entered into an oil and gas lease with the
Osage Nation for a portion of the Osage mineral estate underlying plaintiff David P. Hayes’s
property. Shortly thereafter, the government approved the lease as well as Chaparral’s
applications for permits to drill on Hayes’s property. In turn, Hayes brought this action against
defendants the United States of America, the Department of Interior (DOI), the Bureau of Indian
Affairs (“BIA”) (collectively, “the government”), and Chaparral, alleging that the government’s
approval of the lease and drilling permits failed to comply with NEPA. In response, the
government submits that its approval of lease was exempt from NEPA’s procedural requirements
and that it had already satisfied those requirements with regard to its approval of the drilling
permits.
For the reasons set forth in this Opinion and Order, the court holds that the government
failed to comply with NEPA prior to its approval of Chaparral’s lease and drilling permits. The
court, therefore, declares these documents void.
I.
BACKGROUND
A. Statutory Framework
“In 1872, Congress established a reservation for the Osage Nation in present day
Oklahoma.” Osage Nation v. Irby, 597 F.3d 1117, 1120 (10th Cir. 2010) (citing Act of June 5,
1872, ch. 310, 17 Stat. 228). In 1904 and 1905, large quantities of oil and gas were discovered
on the reservation. See Cohen’s Handbook of Federal Indian Law § 4.07[1][d][ii], at 311 (Neal
Jessup et al., eds., 2005). To manage the Osages’ newfound wealth, Congress enacted the Osage
Allotment Act which placed the mineral estate underlying Osage lands in trust and directed the
Secretary of the Interior to collect and distribute royalty income to tribal members on a quarterly,
pro rata basis. See Act of June 28, 1906, Pub. L. No. 59–321, § 4, 34 Stat. 539 (“1906 Act”).
The government’s trusteeship over the Osage mineral estate was originally set to last twenty-five
years, see 1906 Act §§ 3, 4, but has since been extended “in perpetuity,” see Pub. L. No. 95-496,
§ 2(a), 92 Stat. 1660 (1978).
Under the Act, the Osage Nation may lease portions of the mineral estate for exploration
and development “with the approval of the Secretary of the Interior, and under such rules and
regulations as he may prescribe.” 1906 Act § 3. The Secretary has delegated this authority to
the Superintendent of the Osage Agency. See 25 C.F.R §§ 226.4, 226.5(b). Pursuant to
departmental regulations, “[n]o operations are permitted upon any tract of land until a lease
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covering such tract is approved by the Superintendent.” Id. § 226.34(a). Further, to commence
drilling, a lessee must obtain additional approval from the Superintendent, in the form of a
permit to drill. See id. § 226.34(b); [see also Dkt. #77-5, pp. 40-41].
The Superintendent’s approval of leases and drilling permits on Indian lands constitutes
federal action subject to NEPA. See Davis v. Morton, 469 F.2d 593, 596-97 (10th Cir. 1972);
see also Manygoats v. Kleppe, 558 F.2d 556, 557 (10th Cir. 1977). NEPA “requires federal
agencies … to analyze environmental consequences before initiating actions that potentially
affect the environment.” Utah Envtl. Cong. v. Bosworth, 443 F.3d 732, 735-36 (10th Cir. 2006).
Unlike other environmental statutes, however, NEPA does not mandate any particular
substantive outcome. See Hillsdale Envtl. Loss Prevention, Inc. v. U.S. Army Corps of
Engineers, 702 F.3d 1156, 1166 (10th Cir. 2012). Rather, the Act merely “imposes procedural,
information-gathering requirements on an agency,” id., so as “to ensure that the agency will only
reach a decision on a proposed action after carefully considering [its] environmental impacts,”
Forest Guardians v. U.S. Fish & Wildlife Serv., 611 F.3d 692, 717 (10th Cir. 2010).
NEPA achieves this end by requiring federal agencies to prepare an environmental
impact statement (“EIS”) before taking any “major Federal actions significantly affecting the
quality of the human environment.” 42 U.S.C. § 4332(C)(ii). “An EIS is a detailed document
that identifies the potential impacts a proposal may have on the environment.” Citizens’ Comm.
to Save Our Canyons v. U.S. Forest Serv., 297 F.3d 1012, 1022 (10th Cir. 2002). If an agency is
uncertain whether an EIS is required, it may elect to prepare a less detailed environmental
assessment (“EA”). See Monsanto Co. v. Geertson Seed Farms, 561 U.S. 139, 145 (2010). “An
EA allows the agency to consider environmental concerns, while reserving agency resources to
prepare full EIS’s for appropriate cases.” Park Cty. Res. Council, Inc. v. U.S. Dep’t of Agric.,
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817 F.2d 609, 621 (10th Cir. 1987) (internal quotation marks omitted), overruled on other
grounds by Vill. of Los Ranchos De Albuquerque v. Marsh, 956 F.2d 970 (10th Cir. 1992). “If
after preparing [an] EA, the agency concludes that a proposed action will not significantly affect
the environment, the agency may issue a finding of no significant impact (FONSI) and need not
prepare a full EIS.” McKeen v. U.S. Forest Serv., 615 F.3d 1244, 1248 n.3 (10th Cir. 2010)
(internal quotation marks omitted). Finally, “[i]n certain narrow instances,…an agency is not
required to prepare either an [EA] or an [EIS]. This occurs when the proposed action falls within
a categorical exclusion, i.e., those actions predetermined [by the agency] not to ‘individually or
cumulatively have a significant effect on the human environment.’” Utah Envtl. Cong., 443 F.3d
at 736 (quoting 40 C.F.R. § 1508.4).
“The Council on Environmental Quality (CEQ) is tasked with interpreting NEPA and
establishing regulations governing agencies’ responsibilities under the statute.” Sierra Club, Inc.
v. Bostick, 787 F.3d 1043, 1063 (10th Cir. 2015) (McHugh J., concurring); accord Dep’t of
Transp. v. Pub. Citizen, 541 U.S. 752, 757 (2004). CEQ regulations require federal agencies to
adopt further regulations or procedures identifying specific actions which either normally require
an EIS or are categorically excluded. See 40 C.F.R. § 1501.4(a). If a proposed action does not
fall within either category, the agency then must prepare an EA unless it elects to prepare an EIS.
See id. § 1501.4(b).
B. 1979 Environmental Assessment
In 1978, this court entered an agreed judgment, ordering the Secretary of the Interior and
the Superintendent of the Osage Agency to prepare an EA
of the effect on the environment of oil and gas operations under oil mining leases,
gas mining leases, oil and gas mining leases, drilling permits, authorizations to
use water and other such documents approved or used by the Secretary relating to
oil and gas operations on the lands in Osage County, Oklahoma….
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Judgment and Order at 2, Bell v. Andrus, No. 77-C-159-C (N.D. Okla. May 4, 1978), available
at [Dkt. #63-1, p. 11]. In 1979, the agency issued an EA “describe[ing] and evalut[ing] all
aspects of the oil and gas leasing program in Osage County” under the BIA. [Dkt. #77-2, p.11].
The EA provided, among other things, a detailed explanation of the leasing program, a
description of the County’s existing and likely future environmental conditions, and an
evaluation of the actual or potential environmental impacts of the leasing program. [See id.]
The assessment also described drilling techniques and practices within the County. It
noted that the typical well then drilled in the County was between 2,000 and 2,500 feet deep,
used a 4.5 to 5.5 inch casing, and involved a drilling site occupying approximately half an acre.
[Id. at 20; Dkt. #77-3, p. 46]. The assessment also briefly discussed the then-recent development
of certain secondary production techniques, commonly referred to as “hydraulic fracturing” or
“fracking”:
During the early stages of the production in the County, and extending
through World War II, wells were operated by natural flow or pumping for as
long as they produced enough to make a profit. When production declined to an
uneconomic level a well was abandoned. As general production decreased
through the area, secondary production techniques came into use. These methods
stimulate recovery of oil by using some of the wells to re-inject fluids into the
reservoir formations in order to move or displace oil toward other wells. The
brine which is unavoidably produced with oil is frequently used as the re-injected
fluid. Acid treatment or mechanical fracturing of the rock around wells also can
be used to restore or maintain production by increasing the permeability so that
oil can flow more easily into the well.
At present, two groups in the county (Phillips Petroleum Company, and
Kewanee Petroleum—now owned by Gulf Oil) are experimenting with chemical
treatment of the re-injected fluid in order to enhance its ability to mobilize
remaining oil within the reservoir formation and to move oil more effectively to a
producing well. These tertiary recovery techniques are expensive and are only in
the experimental stage in several parts of the country[.] If oil prices remain high
or increase further, they may become economically feasible methods for oil
recovery.
[Dkt. #77-2, p. 20].
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The EA ultimately concluded that the leasing program would not have a significant
impact on the human environment. In arriving at this conclusion, the assessment discussed the
physical, socioeconomic, cultural, and ecological impacts of drilling in the County, including
their projected future impacts. Notably, all such projections were limited to the year 2000.
Based on EA’s findings, the agency issued a FONSI. [See id. at 2-3].
C. Chaparral Lease and Drilling Permit
In January 2013, Chaparral entered into an oil and gas lease with the Osage Nation for a
160 acre parcel of the Osage mineral estate underlying Hayes’s property. Shortly thereafter, the
BIA approved the lease. In doing so, the BIA determined that its approval fell within a
categorical exception for “[a]pproval of mineral lease adjustments and transfers, including
assignments and subleases.” [Dkt. #77-4, p. 65]; see also 516 DM 10.5(G)(3).
In April 2014, Chaparral submitted an application for a drilling permit to the BIA. The
agency approved the application later that month. In May 2014, the company submitted an
amended drilling permit application, which moved the proposed well site 100 feet to the west.
The agency again approved the application. In issuing the permits, the BIA did not prepare a
new NEPA document nor did it supplement, tier to, incorporate, or otherwise explicitly adopt the
analysis of the 1979 EA.
In August 2014, Hayes brought this action pursuant the Administrative Procedure Act
(“APA”), 5 U.S.C. § 551 et seq., seeking a declaration that the government’s approval of the
Chaparral lease and drilling permits failed to comply with NEPA.
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II.
DISCUSSION
Because NEPA “does not provide a private right of action …, this court reviews an
agency’s approval of a project, including the agency’s compliance with NEPA, under the APA.”
Morris v. U.S. Nuclear Regulatory Comm’n, 598 F.3d 677, 690 (10th Cir. 2010). In doing so,
the court will not “set aside [the] agency decision unless it fails to meet statutory, procedural or
constitutional requirements, or unless it is arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” Sac & Fox Nation of Missouri v. Norton, 240 F.3d 1250,
1260 (10th Cir. 2001). Agency action is arbitrary and capricious if the agency “entirely failed to
consider an important aspect of the problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or [its decision] is so implausible that it could not be
ascribed to a difference in view or the product of agency expertise.” Jagers v. Fed. Crop Ins.
Corp., 758 F.3d 1179, 1184 (10th Cir. 2014) (internal quotation marks omitted).
Here, Hayes challenges the agency’s approval of the Chaparral lease and drilling permits
for failure to comply with NEPA. In response, the agency submits that its approval of the lease
fell within a categorical exclusion and that its approval of the drilling permits was covered by the
1979 EA and FONSI. The court addresses these issues in turn.
A. Approval of Oil and Gas Lease
The court starts with the BIA’s approval of the Chaparral lease. “Once an agency
establishes categorical exclusions, its decision to classify a proposed action as falling within a
particular categorical exclusion will be set aside only if a court determines that the decision was
arbitrary and capricious.” Citizens’ Comm. to Save Our Canyons, 297 F.3d at 1023 (collecting
cases). In undertaking such review, the court must accord substantial deference to the agency’s
interpretation of its own categorical exclusions, see id., and “may reject [that] interpretation only
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when it is unreasonable, plainly erroneous, or inconsistent with the [exclusion’s] plain meaning.”
Utah Envtl. Cong., 443 F.3d at 739 (internal quotation marks omitted); accord Alaska Ctr. For
Env’t v. U.S. Forest Serv., 189 F.3d 851, 857 (9th Cir. 1999).
Pursuant to CEQ regulations, the DOI has designated the BIA’s “[a]pproval of mineral
lease adjustments and transfers, including assignments and subleases” as a categorical exclusion.
516 DM 10.5(G)(3). As previously mentioned, the BIA determined that its approval of the
Chaparral lease fell within this exclusion. In doing so, the agency interpreted the term “lease
transfer” as including the initial transfer of a leasehold from a lessor to a lessee. Hayes
challenges this interpretation, asserting that the cited exclusion applies only to the adjustment or
transfer of existing leases, not the execution of new leases. In response, the agency asserts that
its interpretation of the exclusion is reasonable and thus is entitled to controlling weight.
In assessing these positions, the court begins, as it must, with the text of the categorical
exclusion. See Rocky Mountain Radar, Inc. v. F.C.C., 158 F.3d 1118, 1124 (10th Cir. 1998). As
relevant here, the exclusion covers the “[a]pproval of mineral lease…transfers.” 516 DM
10.5(G)(3). In the court’s view, the plain meaning of this language precludes the agency’s
interpretation. As a definitional matter, the term “lease,” itself, refers to the initial transfer of a
leasehold from a lessor to a lessee. See Merriam-Webster Online, http://www.merriamwebster.com/dictionary/lease; Lease, Black’s Law Dictionary (8th ed. 2004). Thus, the
“transfer” of a lease necessarily denotes the transfer of rights under an existing lease from a
lessor or lessee to some third party. The BIA’s interpretation of this language renders the word
“transfer” virtually meaningless and thus is incompatible with the plain wording of the exclusion.
The court’s understanding of the relevant language is confirmed by its context. As an
initial matter, the exclusion does not use the term “lease transfers” in isolation, but rather refers
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to “lease adjustments and transfers.” Because a lease must exist before it can be adjusted, the
exclusion’s grouping of “adjustments and transfers” plainly suggests that the exclusion was
intended to apply to actions taken on an existing lease.
Second, the examples of a “lease transfer” provided in the exclusion—assignments and
subleases—both refer to transfers of an existing lease. Although this listing is certainly not
exhaustive, the fact that both examples share this basic characteristic further indicates that the
exclusion was not meant to apply to the creation of a new lease. See Freeman v. Quicken Loans,
Inc., 132 S. Ct. 2034, 2042 (2012) (“[T]he commonsense canon of noscitur a sociis…counsels
that a word is given more precise content by the neighboring words with which it is associated.”
(internal quotation marks omitted)).1
Finally, and most importantly, the agency’s interpretation of the term “lease transfer”
requires reading different language in two of the agency’s categorical exclusions as having the
same meaning. Cf. Sosa v. Alvarez-Machain, 542 U.S. 692, 711 n.9 (2004) (noting that “when
the legislature uses certain language in one part of the statute and different language in another,
the court assumes different meanings were intended” (internal quotation marks omitted)).
Specifically, the agency’s Departmental Manual includes a categorical exclusion for
“[a]pproval[]…of conveyances and other transfers of interests in land where no change in the
land use is planned.” 516 DM 10.5(I). If the agency truly meant for the term “lease transfers” to
1
See also United Rentals Nw., Inc. v. Yearout Mech., Inc., 573 F.3d 997, 1001 (10th Cir. 2009)
(“[T]he principle of statutory interpretation called noscitur a sociis…allows a court to interpret
general terms of statute by association with more specific words, regardless of the order of the
words in the statute.”); In re Piazza, 719 F.3d 1253, 1263 n.4 (11th Cir. 2013) (noting that the
canon of noscitur a sociis applies “when general language, such as ‘including,’ precedes specific
examples” (emphasis in original)); 2A Norman J. Singer et al., Sutherland Statutory Construction
§ 47:16 (7th ed. 2007) (“[W]hen two or more words are grouped together, and ordinarily have a
similar meaning, but are not equally comprehensive, a general word is limited and qualified by a
special word.”).
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include the initial transfer of a leasehold interest from lessor to lessee, the language of this latter
exclusion clearly indicates that it knew how to do so. The agency’s use of different language in
parallel exclusions strongly suggests that different meanings were intended. See Weight Loss
Healthcare Centers of Am., Inc. v. Office of Pers. Mgmt., 655 F.3d 1202, 1210 (10th Cir. 2011)
(“When the drafters so clearly knew how to express one meaning, their failure to do so implies
that the meaning was not intended.”); accord Atlas Tel. Co. v. Oklahoma Corp. Comm’n, 400
F.3d 1256, 1265 (10th Cir. 2005) (“When … an agency includes a specific term … in one
provision of a regulation, but excludes it in another, we will not presume that such term …
applies to provisions from which it is omitted.”).
In sum, the BIA’s determination that its approval of the Chaparral lease fell within a
categorical exclusion was premised on a plainly erroneous legal interpretation and, thus, was
arbitrary and capricious. The court, therefore, declares the lease void ab initio. Sangre de Cristo
Dev. Co. v. United States, 932 F.2d 891, 894-95 (10th Cir. 1991) (holding that an agency’s
failure to comply with NEPA before approving a lease renders the agency’s approval of the lease
invalid).2
B. Approval of Drilling Permits
The court next considers the BIA’s approval of the drilling permits. As a reminder, the
BIA submits that such action was covered by the 1979 EA and FONSI. Hayes challenges this
2
The government submits that the appropriate remedy here is to remand the case to the BIA
without invalidating the lease. The court disagrees. The Tenth Circuit’s decision in Sangre de
Cristo Development Co., 932 F.2d at 894, clearly holds that an agency’s failure to comply with
NEPA renders the agency action at issue invalid. Thus, the BIA’s approval of the Chaparral
lease was invalid. Because the court reads 25 C.F.R. § 226.34(a) and § 3 of the 1906 Act “as
requiring…valid approval from the [government] in order for [a] lease contract to have legal
effect, the … lease contract between [Chaparral] and the [Osage Nation] vested no property
interest in [Chaparral].” Id. at 895.
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position several grounds. His contentions, however, generally can be sorted into two groups.
First, he contends that the 1979 EA was a broad, programmatic assessment of the oil and gas
leasing program in Osage County and thus, without more, is too general to allow for the issuance
of site-specific drilling permits. Second, he submits that the analysis contained in the 1979 EA is
outdated and, consequently, that the BIA’s reliance on the assessment was arbitrary and
capricious.3 The court considers these issues in turn.
1. Need for a Site-Specific Analysis
The court first considers Hayes’s contention that the 1979 EA is too general to support
the site-specific agency action at issue here. As previously mentioned, federal agencies are
required to prepare an EA for any proposed action unless (1) the agency has elected or is
otherwise required to prepare an EIS or (2) the action is subject to a categorical exclusion. See
40 C.F.R. §§ 1501.3, 1501.4(a)-(b). The term “action” encompasses a broad range of agency
conduct, including the adoption of official policies, plans, or programs as well as well as the
approval of specific projects. See id. § 1508.18(b). Both forms of action require compliance
with NEPA. See id. Thus, if an agency adopts an official plan or program and, in furtherance
thereof, later approves a specific project, the agency ordinarily must prepare a separate EA or
EIS for both actions. See New Mexico ex rel. Richardson v. Bureau of Land Mgmt., 565 F.3d
683, 716-19 (10th Cir. 2009).
In such cases, agencies are encouraged to “use existing NEPA analyses for assessing the
impacts of a proposed action and any alternatives.” 43 C.F.R. § 46.120(a). This can be done “by
3
Hayes also contends that the 1979 EA and FONSI lacked adequate evidentiary support and
failed to comply with NEPA’s public involvement requirements. [See Dkt. #79, Plaintiff’s Brief,
pp. 18-20]. Given the court’s rulings on plaintiff’s other contentions, it need not resolve these
issues here.
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supplementing, tiering to, incorporating by reference, or adopting previous NEPA environmental
analyses.” Id. at § 46.120(d); see also id. § 46.135 (incorporation by reference); id. § 46.140
(tiering). “Tiering” refers to a procedure by which an agency is allowed to incorporate
statements from an existing, broader EIS to provide the analysis for a subsequent, narrower
NEPA document. See 40 C.F.R. §§ 1502.20, 1508.28. “Tiering is appropriate when,” among
other settings, “the sequence of statements or analyses is … [f]rom a program, plan, or policy
[EIS] … to a site-specific statement or analysis.” Id. § 1508.28. The DOI’s supplemental NEPA
regulations further permit the agency, and its constituent bureaus (including the BIA), to use an
“existing environmental analysis…in its entirety if the [agency or bureau] determines, with
appropriate supporting documentation, that it adequately assesses the environmental effects of
the proposed action and reasonable alternatives.” 43 C.F.R. § 46.120(c); accord id. § 46.300 (“A
bureau must ensure that an [EA] is prepared for all proposed Federal actions, except those …
[t]hat are covered sufficiently by an earlier environmental document as determined and
documented by the Responsible Official[.]”).
Here, Hayes’s contends that the 1979 EA is a broad, programmatic document and thus,
without more, is too general to allow for the issuance of site-specific drilling permits. In
response, the government argues that the 1979 EA addressed all current and anticipated drilling
in Osage County and thus automatically covers the BIA’s approval of the Chaparral drilling
permits. Alternatively, the government submits that any violation on its part was trivial and thus
harmless.
The government’s position lacks merit. As an initial matter, the court notes that the
BIA’s approval of a drilling permit is an agency action requiring, at a minimum, the preparation
of an EA. See 40 C.F.R. § 1501.4(a)-(b); 516 DM 10.4, 10.5; see also 43 C.F.R. § 46.300; id.
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§ 46.30 (defining “[p]roposed action” as including a federal agency’s issuance of a permit). The
1979 EA is, as Hayes notes, a broad, programmatic document meant to “describe and evaluate all
aspects of the oil and gas leasing program in Osage County as it is supervised under existing
regulations by the [BIA].” [Dkt. #77-2, 1979 EA, p. 11]. The assessment does not specifically
address the environmental impact of the BIA’s approval of the Chaparral drilling permits. To the
extent the BIA believed that such action was “sufficiently covered by” the 1979 EA so as to
obviate the need for a new EA, applicable DOI regulations require the agency to make that
determination explicitly, “with appropriate supporting documentation.” 43 C.F.R. §§ 46.120(c),
46.300. In particular, “[t]he supporting record must include an evaluation of whether new
circumstances, new information or changes in the action or its impacts not previously analyzed
may result in significantly different environmental effects.” Id. § 46.120(c). Here, the BIA did
not follow these procedures, nor did it make any effort to explicitly incorporate, tier to, or adopt
the analysis contained in the 1979 EA. The agency, thus, has failed to comply with NEPA.
The government’s arguments to the contrary are unpersuasive. In its view, a
programmatic EA automatically covers all site-specific agency action subsequently taken in
furtherance of the program at issue. In support of this position, the government points to the
Tenth Circuit’s statement in Wyoming v. United States Department of Agriculture, 661 F.3d 1209
(10th Cir. 2011), that neither NEPA nor the CEQ regulations “requires an agency to include a
site-specific analysis for every particular area affected by [a] proposed action.” Id. at 1255.
The government’s reliance on Wyoming is misplaced. That case involved a NEPA
challenge to the Forest Service’s adoption of a nationwide rule—known as the “roadless rule”—
prohibiting road construction and certain other activities on lands within the National Forest
System designated as “inventoried roadless areas.” Id. at 1222-25. The State of Wyoming
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challenged the action, asserting that the agency’s EIS for the proposed rule violated NEPA by
failing to include a site-specific analysis of every area affected by the rule. Id. at 1254. The
district court rejected this argument, and the Tenth Circuit affirmed, holding that NEPA does not
require “that agencies prepare a site-specific analysis for every specific location affected by a
broad administrative action.” Id. at 1255 (emphasis added). Notably, the court did not hold, as
the government now contends, that a site-specific analysis is never required under NEPA or that
somehow a programmatic EA automatically covers all site-specific agency action subsequently
taken in furtherance of the relevant program. See id. at 1255-56. Rather, Wyoming merely holds
that broad agency action (such as the adoption of new programs or regulations) does not require
site-specific environmental analysis. Id.
Wyoming’s holding is irrelevant to the site-specific agency action at issue here. Unlike
Wyoming, which involved one broad agency action, this case involves a broad action followed by
a narrower, related action. In particular, it involves the BIA’s adoption of an oil and gas leasing
program in Osage County—the broad action—followed by its approval of the Chaparral drilling
permits—the narrower action. As applied here, Wyoming merely holds that the BIA’s EA for the
oil and gas leasing program (i.e., the 1979 EA) need not include a site-specific analysis of every
area affected by the program. The decision does not in any way indicate that the 1979 EA
automatically covers all site-specific drilling permits issued as part of the broader leasing
program—a holding which would plainly disregard applicable regulations and circuit precedent.4
See supra pp. 11-13 (discussing relevant regulations); see also New Mexico, 565 F.3d at 716-19.
4
The government further submits that requiring a new EA for every new drilling permit would
render the BIA’s permitting process “intractable.” [Dkt. #81, p. 19]. This contention overlooks
important regulatory provisions allowing the agency to streamline the NEPA process. As
previously discussed, applicable DOI regulations permit the agency to “use existing NEPA
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As an alternative position, the government submits that any NEPA violation on its part
was trivial and thus harmless error. Although neither NEPA nor the APA requires reversal for
trivial errors, see Hillsdale Envtl. Loss Prevention, Inc, 702 F.3d at 1165, the error here was by
no means harmless. The harm that NEPA seeks to avoid is environmentally uninformed
decision-making. Cf. Sierra Club v. U.S. Dep’t of Energy, 287 F.3d 1256, 1265 (10th Cir. 2002)
(“An injury under the NEPA results not from the agency’s decision, but rather from the agency’s
uninformed decisionmaking.” (internal quotation marks omitted)). It does so by requiring
agencies to gather and document information concerning the environmental impacts of their
actions. See Lee v. U.S. Air Force, 354 F.3d 1229, 1237 (10th Cir. 2004). The BIA has not
followed these steps here. Although it now contends that the analysis in the 1979 EA adequately
covers its approval of the Chaparral drilling permits, the agency has not provided any supporting
documentation to that effect.5 Under such circumstances, the court cannot treat the violation at
issue as harmless.
In sum, the BIA’s approval of the Chaparral drilling permits required, at a minimum, that
the agency either (1) prepare a new EA or (2) determine, with appropriate supporting
analyses for assessing the impacts of a proposed action and any alternatives.” 43 C.F.R.
§ 46.120(a). Although such reuse is not without its own procedural hurdles, see § 46.120(c), the
procedures at issue are by no means “intractable.” Further, if the BIA needs a faster process for
approving drilling permits and, as the agency contends, such action will not have a significant
impact on the environment, CEQ regulations dictate that proper course of action is for the BIA to
issue a categorical exclusion for the agency action at issue. See 40 C.F.R. §§ 1501.4(a)(2),
1508.4. The BIA’s current course of action—relying on a broad, programmatic EA to support
site-specific agency action—seeks to obtain the benefits of a categorical exclusion without going
through the notice and comment procedures necessary to promulgate a categorical exclusion.
See id. §§ 1507.3, 1508.4.
5
See 43 C.F.R. § 46.120(c) (requiring an agency wishing to use an existing NEPA document to
“determine[], with appropriate supporting documentation,” that the existing document
“adequately assesses the environmental effects of the proposed action” (emphasis added));
accord id. § 46.300 (stating the same requirement for using an existing EA).
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documentation, that the 1979 EA adequately assessed the environmental effects of the proposed
action. The BIA did not comply with either procedure. Its failure to do so constitutes a material
violation of NEPA.
2. Whether the 1979 EA is Outdated
Hayes next contends that the analysis contained in the 1979 EA is outdated and thus that
the BIA’s reliance on the assessment was arbitrary and capricious. Under CEQ regulations, an
agency must supplement an EIS if “[t]here are significant new circumstances or information
relevant to environmental concerns and bearing on the proposed action or its impacts.” 40
C.F.R. § 1502.9(c)(1)(ii). This same standard applies to the supplementation of EAs. See S.
Utah Wilderness All. v. Norton, 301 F.3d 1217, 1238 n.19 (10th Cir. 2002) (“The standard for
preparing a supplemental EA is the same as for preparing [a supplemental EIS].”), rev’d on other
grounds, 542 U.S. 55 (2004); Friends of the Bow v. Thompson, 124 F.3d 1210, 1218 & n.3 (10th
Cir. 1997).6 CEQ guidance indicates that, “[a]s a rule of thumb,” a programmatic NEPA
document “that [is] more than 5 years old should be carefully reexamined to determine” whether
supplementation is necessary. Forty Most Asked Questions Concerning CEQ’s National
Environmental Policy Act Regulations, 46 Fed. Reg. 18,026, 18,036 (Mar. 23, 1981).7
Reviewing an agency’s decision not to prepare a supplemental EA or EIS involves a twostep inquiry. First, the court must “look to see if the agency took a ‘hard look’ at the new
information to determine whether supplemental NEPA analysis is necessary.” S. Utah
6
See also Bureau of Indian Affairs, Indian Affairs National Environmental Policy Act (NEPA)
Guidebook 15 (2012), http://www.bia.gov/cs/groups/xraca/documents/text/idc009157.pdf (noting
that the BIA applies CEQ regulations concerning the supplementation of EISs to EAs).
7
The court “consider[s] this document ‘persuasive authority offering interpretive guidance’
regarding the meaning of NEPA and the implementing regulations.” New Mexico, 565 F.3d at
721 n.25 (quoting Davis, 302 F.3d at 1125 n.17).
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Wilderness All., 301 F.3d at 1238 (internal quotation marks omitted) (alterations in original
omitted), rev’d on other grounds, 542 U.S. 55, 73 (2004) (noting that NEPA “require[s] an
agency to take a ‘hard look’ at new information to assess whether supplementation might be
necessary”). “Second, [if the] court determines that [the] agency took the requisite ‘hard look,’ it
[then] reviews [the] agency’s decision not to issue … a supplemental EA [or EIS] under the
APA’s arbitrary and capricious standard.” Id. (citing Marsh v. Oregon Nat. Res. Council, 490
U.S. 360, 377 (1989)); see also Nat. Res. Def. Council, Inc. v. F.A.A., 564 F.3d 549, 561 (2d Cir.
2009) (outlining the same two-step analysis); Hughes River Watershed Conservancy v.
Glickman, 81 F.3d 437, 443 (4th Cir. 1996) (same).
Hayes submits that the 1979 EA requires supplementation. In particular, he asserts that
since 1979 there have been significant legal and technological changes relevant to the
environmental impacts of drilling in Osage County. Most notably, he points to the growth and
development of hydraulic fracturing. He presents evidence that, unlike 1979, today many well
completions in Osage County involve hydraulic fracturing and that such operations employ far
larger quantities of fluid driven by significantly more hydraulic horsepower than was the case in
1979. [See Dkt. #79-1, Affidavit of Dr. J. Berton Fisher, p. 3].8 Given these changes, and others,
Hayes contends that the BIA’s reliance on the 1979 EA to support its approval of the Chaparral
drilling permits was arbitrary and capricious.
8
The court may consider extra-record evidence “where the agency ignored relevant factors it
should have considered or considered factors left out of the formal record.” Lee, 354 F.3d at
1242. Hayes offers Dr. Fisher’s affidavit to identify new circumstances and information that, he
contends, the BIA should have considered. See 40 C.F.R. § 1502.9(c)(1)(ii). The court
concludes that consideration of the proffered evidence for this limited purpose is permissible.
[See Dkt. #92, pp. 3-4].
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In response, the government submits that the 1979 EA adequately evaluates the potential
environmental impacts of hydraulic fracturing and that its determination that the 1979 EA does
not require supplementation was not plainly erroneous.
The court agrees with Hayes. As an initial matter, neither the administrative record nor
the parties’ briefs contains any indication that the government actually considered whether the
1979 EA requires supplementation. Although the government states that it made this
determination “prior to approving the [Chaparral] drilling permit[s],” [Dkt. #81, p. 24], there is
nothing in the record to support that assertion. Moreover, even if the agency had made this
determination, neither the record nor the government’s brief contains any explanation for such a
decision. Under these circumstances, the court cannot say that the government has taken the
requisite “‘hard look’ at new information to assess whether supplementation might be
necessary.” Norton v. S. Utah Wilderness All., 542 U.S. 55, 73 (2004); see also Marsh, 490 U.S.
at 378 (“[I]n the context of reviewing a decision not to supplement an EIS, courts should not
automatically defer to the agency[]…without carefully reviewing the record and satisfying
themselves that the agency has made a reasoned decision based on its evaluation of the
significance—or lack of significance—of the new information.”).
In any event, even if the BIA had consciously determined that supplementation was
unnecessary, the court concludes that determination was arbitrary and capricious. The 1979 EA
does not contain any discussion of the environmental impacts of hydraulic fracturing. Rather,
the assessment merely notes that such technology exists and that it is “expensive and [is] only in
[its] experimental stage[s].” [Dkt. #77-2, p. 20]. The EA concludes its discussion of the issue by
noting that “[i]f oil prices remain high or increase further, [such drilling techniques] may become
[an] economically feasible method[] for oil recovery.” [Id.] Today, numerous wells drilled and
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completed in Osage County involve hydraulic fracturing, and the systems, technology, and
chemical completion fluids used in such operations have changed dramatically. [See Dkt. #79-1,
Affidavit of Dr. J. Berton Fisher, p. 3]. The government cannot reasonably contend that these
changes are insignificant or that they are somehow irrelevant to the environmental impacts of
drilling operations in Osage County. Cf. 40 C.F.R. § 1502.9(c)(1)(ii) (requiring supplementation
if “[t]here are significant new circumstances or information relevant to environmental concerns
and bearing on the proposed action or its impacts”). The court, therefore, concludes that the
government’s reliance on the 1979 EA, without supplementation, was arbitrary and capricious.
In sum, the BIA’s approval of the Chaparral drilling permits violated NEPA for two
independent reasons. First, the agency did not prepare a new EA for the action, nor did it follow
the procedures necessary rely on the 1979 EA. Second, even if the agency had followed the
proper procedures, its reliance on the 1979 EA, without supplementation, was arbitrary and
capricious. For these reasons, the court declares the drilling permits void ab initio. See Sangre
de Cristo Dev. Co., 932 F.2d at 894-95; see also supra note 2.
Conclusion
For the forgoing reasons, the court finds that the BIA’s approval of the Chaparral lease
and drilling permits failed to comply with NEPA. The court, therefore, declares the lease and
drilling permits void ab initio.
IT IS SO ORDERED this 5th day of January, 2016.
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