Northern Oklahoma District Chief Judge Gregory Frizzell ruled the Bureau of Indian Affairs Osage Agency did not follow the National Environmental Policy Act when it approved two oil and gas leases in 2014 for Chaparral Energy, LLC.
Frizzell issued his ruling Dec. 21 in David P. Hayes, Trustee for the Paul B. Hayes Family Trust, Dated April 30, 2010 v. Chaparral Energy, LLC; United States of America; Department of Interior and Bureau of Indian Affairs. The ruling makes null and void two permits to drill from Chaparral Energy from April 29, 2014, and June 11, 2014. Chaparral Energy is one of the few companies still drilling in the Osage.
According to the ruling: “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 [environmental assessment] 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.”
Void ab initio means, void from the beginning. To what scope Frizzell meant for the oil and gas drilling permits is yet to be determined.
The Osage Agency claimed it approved the leases because the leases fell within a categorical exclusion and that the 1979 EA it was operating from had a Finding of No Significant Impact (FONSI) on the environment and covered the leases. The 1979 EA was found to be outdated and the Osage Agency should have conducted new EA’s for the Chaparral leases.
Superintendent Robin Phillips required an EA for every drill site in August 2014 from producers, the same month Hayes filed his lawsuit. The Osage Producers Association has blamed the Osage Agency for the halt in drilling over the past year-and-a-half and said the process for conducting an EA is costly and cumbersome.
Members of the Osage Minerals Council were unavailable for comment on the ruling.
Osage Agency Superintendent Robin Phillips was also unavailable for comment.
According to the ruling, the NEPA requires federal agencies to develop an Environmental Impact Statement (EIS) from which the agency can develop a new EA. An EIS is “a detailed document that identifies the potential impacts a proposal may have on the environment.”
Without an up-to-date EIS in place the Agency is to develop an EA to operate from until an adequate EIS is developed, according to the ruling. The last time the Osage Agency developed an EA was in 1979 and its provisions went out of date in the year 2000, according to the ruling. The 1979 EA does not have regulations for “fracking,” or hydraulic fracturing which is a commonly used technique for oil and gas drilling. Fracking was mentioned in the 1979 EA but only as a new technology being developed.
The Osage Agency debuted a new EIS in November to the public and was met with outrage from some producers. Many believed the Agency could keep operating off of the 1979 EA. Frizzell disagreed.
Shane Matson, OPA President, did not immediately return requests for comment.
David P. Hayes
Chaparral was approved for an oil and gas lease for a 160-acre parcel in January 2013, under David Hayes property in Osage County. In April 2014 the BIA granted Chaparral a drilling permit. In May 2014 the BIA approved an amended drilling permit, moving the proposed well site 100 feet to the west.
“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,” according to the ruling.
According to the ruling, if there are circumstances that fall outside of a current NEPA document, the Agency is required to conduct a new EA to make sure there is no environmental impact. The Osage Agency showed no documentation to Frizzell that it conducted a new EA for the Chaparral leases.
Principal Chief Geoffrey Standing Bear said the Osage Agency offered an opportunity to the Osage Nation to be a participating agency in the development of the new EIS. The same offer was made to the Minerals Council who chose not to participate.
Standing Bear said the Nation’s Historic Preservation Office and Environmental and Natural Resource department participated in developing procedures to protect burial sites, artifacts, as well as making sure no damage came to environmental and surface waters, primarily.
“I attended a meeting toward the end of the process, it was going very fast, I kept asking who is going to represent the interest of our Osage shareholders, because the Nation can’t do that and the BIA told us they were going to go ahead and do what they want and that’s what we did not want to happen with the Nation’s side of it,” Standing Bear said. “If we did not participate they were going to go ahead and do what they wanted without regard to our historic preservation and water issues.”
Standing Bear said he wasn’t surprised to read the 1979 EA was outdated because “that was a long, long time ago.” But he was surprised to see that Frizzell not only said the permitting was void, but the leases were void too. He said he called two of his attorney friends who represent small oil producers and they were waiting for Frizzell to provide scope on his ruling. One scenario is that every lease since 1979 is void.
“One attorney told me his clients canceled a major oil and gas transaction, it was scheduled a day after the Hayes decision came out, they just had to cancel it,” Standing Bear said. “Another lawyer in Bartlesville said his clients, they also represent banks, said there is no way they can loan any money. It was already difficult.”
Standing Bear said many are waiting to see how Northern Oklahoma District Judge James Payne will rule in the Martha Donelson case, which also alleges NEPA violations on more than 27 oil companies.