Divide lease decision likely to land in court
November 28, 2016
A recent U.S. Bureau of Land Management decision regarding 65 previously issued oil and gas leases on the White River National Forest, including the cancellation of 25 leases in the Thompson Divide area, is almost certain to end up in federal court.
What form that will take over what claims, and which entities decide to seek legal remedies, is a matter for lawyers working on both sides of the ongoing dispute to determine.
The formal Record of Decision issued Nov. 17 in Denver and signed by state BLM Director Ruth Welch and Interior Department Deputy Secretary Michael Connor stipulates that any challenges must come in federal district court, rather than by administrative appeal.
One of the energy companies whose 18 Divide-area leases southwest of Glenwood Springs were canceled vowed to take legal action based on evidence it says points to collusion between the Obama administration and environmental interests to reach a "predetermined political decision."
“If a pathway exists for righting this constitutional wrong administratively, we’ll certainly pursue it.”
executive director, West Slope Colorado Oil and Gas Association
"We will seek lost profits in the courts," Robbie Guinn, vice president for Houston-based SG Interests, reiterated last week.
Guinn pointed to testimony he gave in July to the Subcommittee on Natural Resources in Washington referring to BLM communications obtained through a Freedom of Information Act request as the basis for that legal action.
In that testimony, Guinn argued that what should have been a routine unitization, or grouping, of oil and gas leases in SG's Lake Ridge Unit in advance of seeking drilling permits, ended up becoming politicized and resulted in the retroactive review of the 65 leases.
Key to the argument will also likely be a new U.S. Geological Survey study released in the spring that suggests a far greater amount of recoverable natural gas within northwestern Colorado's Piceance Basin than earlier believed.
Meanwhile, Don Simpson, vice president for Colorado-based Ursa Resources, the holder of the other seven canceled Thompson Divide leases, said Ursa is still weighing its options.
"We still have to read through the [record of decision], which is pretty voluminous," Simpson said Monday, adding, "we did find it a little bit presumptuous to say it was a balanced settlement and that industry bought into it."
It's also possible the Carbondale-based Wilderness Workshop and other environmental groups could challenge the decision with regard to the 40 leases that were not canceled.
"We are very supportive of the decision to protect that much of the Thompson Divide," Peter Hart, staff attorney for the Wilderness Workshop, said of the canceled leases. "But we remain critical of the decision not to provide adequate protections on those leases that lie within and just outside the Divide."
The BLM decision allowed all but about a dozen of those 40 leases to continue under the less-restrictive 1993 leasing rules in place when they were issued between 1995 and 2012. Several of those leases are in production or tied to those in production through unitization.
The other dozen or so leases are to follow rules contained in the amended 2015 White River Forest leasing management plan that prohibits surface development.
"This part of the decision fails to ensure that future development will protect clean air and water, wildlife and other important values," Hart said in a statement issued when the decision was announced.
"The plan rolls back protections that were proposed as recently as last November for lands in the Willow Creek, Mamm Peak and Battlement Mesa roadless areas," Hart continued. "These areas lie within and immediately west of the Thompson Divide, and they are just as ecologically important as the lands where BLM has canceled leases."
Hart said the Wilderness Workshop is still weighing its response. Any legal challenges could be filed independently, or in conjunction with other groups that share the same concerns, he said.
David Ludlam, executive director for the West Slope Colorado Oil and Gas Association, wouldn't rule out the prospect of having the canceled leases reinstated under the incoming Trump administration.
Interior Secretary Sally Jewell, who was on hand for the BLM announcement in Denver, said she believes the decision will hold up legally given the lengthy environmental review that was meant to address deficiencies in the original lease analyses.
"If a pathway exists for righting this constitutional wrong administratively, we'll certainly pursue it," Ludlam said.
He conceded, however, that any court remedy would likely be aimed at seeking just compensation for the canceled leases.
As it stands, the BLM proposes to reimburse a total of about $1 million to SG and Ursa, which it says represents the amount paid at auction for the leases more than a dozen years ago.
Guinn said SG will seek damages above and beyond that amount, given the investment the company has made toward developing the leases and for potential future production.
Ludlam said West Slope COGA could join in whatever legal challenge arises if it seems appropriate.
"We will intervene in any lawsuit or legal filing where our experience and involvement in this issue can help support the sanctity of commercial contract and lease rights moving forward," he said.
The Wilderness Workshop's Hart said he's confident the decision to cancel leases will stand, saying it was based on overwhelming local public input and wasn't directed out of Washington.
"We think the public has spoken on this, and the agency decision to the extent that it protects natural resources is a good one," Hart said.
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