25 September 2017

Tenth Circuit Dismissal of BLM Hydraulic Fracturing Rule Leads to Regulatory Uncertainty

A September 27, 2017 decision by the U.S. Court of Appeals for the Tenth Circuit has created significant confusion on whether federal regulations governing hydraulic fracturing on federal and Indian lands are now in effect. At first blush, the decision appeared to be a victory for the states and industry groups that sued to block the regulations, but the court’s remedy — vacating a lower court decision striking down the rule — has left the U.S. Bureau of Land Management (BLM), states, industry and environmental groups with very different views about the current legal obligations for oil and gas companies operating on federal and Indian lands. 

In its ruling, the Tenth Circuit dismissed an appeal of a district court order vacating a 2015 BLM rule establishing regulations for hydraulic fracturing on federal and Indian lands. 80 Fed. Reg. 16,128 (Mar. 26, 2015). The court held that the appeal, filed by BLM and several environmental groups, was prudentially unripe because BLM proposed to rescind the rule in July. 82 Fed. Reg. 34,464 (July 25, 2017). It declined to keep the appeal in abeyance during the rulemaking process, as BLM requested, stating that it was not the role of courts “to supervise or monitor the rulemaking efforts of an Article II agency.” Slip Op. at 18.

The key issue, however, was the effect of dismissing the appeal on the district court’s judgment, which vacated the BLM hydraulic fracturing rule on June 21, 2016. Two judges voted to vacate the lower court judgment, citing past practices in similar cases and stating that there would be nothing for the district court to do upon remand other than wait for the rulemaking process to conclude. The Tenth Circuit’s vacatur of the district court’s judgment, however, leaves significant uncertainty as to the current status of the 2015 BLM rule. Environmental groups claimed that the rule is now in effect and oil and gas companies operating on federal and Indian lands must comply with it. Others, however, pointed to the court’s discussion of whether to dismiss the appeal as prudentially unripe where it stated that dismissal would not harm the environmental groups because it would reinstate “the status quo since 2015.” Slip Op. at 16. The rule was scheduled to take effect on June 24, 2015, but the district court stayed the effective date pending a decision on a motion by states and industry groups for a preliminary injunction. Since the district court granted the preliminary injunction and subsequently vacated the rule on the merits, BLM’s hydraulic fracturing rule was never in effect during 2015. Several parties to the appeal are likely to seek rehearing in order to obtain further clarification from the court.