Minerals Council

Osage Minerals Council suing Department of Interior over new regulations

The Osage Minerals Council ended its silence on June 30 by filing suit in the District Court for the Northern District of Oklahoma to prevent the new BIA oil and gas regulations from going into effect on July 10.

Specifically, the OMC is suing the U.S. Department of Interior, Bureau of Indian Affairs, Secretary of the Interior Sally Jewell and BIA Director Mike Black. It is asking the court to review whether if the 155-page final rules for 25 CFR Part 226 for oil and gas drilling are in compliance with the Administrative Procedures Act (APA) – which governs the way federal agencies may propose and establish regulations.

In a prepared release, the OMC said the new regulations will “cause irreversible damage to the Osage Mineral Estate” and “the OMC will suffer an immediate loss of its authority over the management of its mineral estate,” should the rules go into effect.

The OMC, represented by Fredericks Peebles & Morgan LLP, a law firm that focuses on federal and Indian law, claims the new rules are arbitrary, capricious, an abuse of discretion, not in accordance with law, will be harmful to the local economy and are in violation with the APA.

“In fact, producers are plugging and abandoning their wells, rather than attempting to comply and continue to drill,” according to a Minerals Council press release. “Although the OMC has attempted to have the Final Rule modified so as to comport with law and to consider alleviating some of the costs associated with compliance issues resulting from the Final Rules, the OMC’s efforts have fallen on deaf ears.”

One example of an oil company leaving Osage County is Biddick, Biddick & Revard (BBR). The company has been drilling in the Osage for more than 60 years and according to an email from Osage tribal member and producer, Paul Revard, the company is leaving due to “the burdens created by the new CFR’s.” Revard said BBR was a third-generation oil company, partly started by his father George E. Revard. He said he is also considering abandoning his 38 Osage wells after July 10.

“The Shareholders need to know that there are many more operators that will be forced out soon,” Revard said. “It’s really sad that the Shareholders are not assisting the producers.”

According to the lawsuit, the negotiated rulemaking process was a stipulation of the 2011 Osage Trust Case settlement in which the Nation received $380 million from the BIA for mismanagement of the Osage Minerals Estate. The rulemaking process, which began in 2012, was supposed to improve the management of the Osage Mineral Estate, not make it worse, according to the lawsuit. 

According to the lawsuit, the OMC tried repeatedly to dispute the new rules by going through an Informal Dispute Resolution outlined in the 2011 settlement but was ignored and told by BIA officials the OMC could only dispute the new rules after they went into effect.

The Osage Producers’ Association has also filed suit against Jewell, Black, the DOI and the BIA in district court. However, the OPA is demanding a jury trial but also the court review if the negotiated rulemaking committee complied with the APA in issuing its new rules.

The OPA is a nonprofit organization made up of oil and gas producers based in Osage County and are being represented by Tulsa-based law firm Levinson, Smith & Huffman, P.C.

According to the OMC release, the Osage Agency for the BIA made promises they would do their best to educate producers on the new rules, provide computers and office space in the Agency to teach them how to comply, and bring in Bureau of Land Management (BLM) petroleum engineers to train Osage Agency compliance officers.

“However, the BIA’s assurances have not come close to being fulfilled. The BIA already struggles to meet its current workload of leasing, environmental analysis, permitting, inspecting, and accounting for the Osage Mineral Estate. The BIA is not prepared to implement the new regulations, nor does it have the resources or the expertise to do so,” according to the release.

The same sentiment was expressed at a public meeting on June 17 at the Wah-Zha-Zhi Cultural Center. More than a hundred producers attended the meeting, many frustrated, many worried, about how the new regulations would affect their businesses. Former Osage Congressman and current board member of the Osage Nation Energy Services, LLC, Eddy Red Eagle stood up and told the Osage Agency Superintendent Robin Phillips he was going to do something very taboo for an Osage, he was going to point his finger at her.

“I’ve got my finger raised and it’s pointed at your office. You’re not ready, you don’t possess the technical skills, the skill sets, the expertise to carry out these new regulations,” Red Eagle said. “What you’re doing is something we foresaw 18 months ago and this system is flawed.”

A scheduling conference has been planned for July 15 in Tulsa. Federal Judge Gregory Frizzell will be presiding over the case.

Download the lawsuits at:  http://static.osagenews.org.s3.amazonaws.com/cms_page_media/43/OMCLawsuitVSbia.pdf

http://static.osagenews.org.s3.amazonaws.com/cms_page_media/43/FedLawsuitOilProducers.pdf