States Push Back Against BLM

Do the States Have Authority Over Oil and Gas Activity on Federal Lands?

The battle between a number of states and The Bureau of Land Management over the regulation of oil and gas on federal lands presses on. In 2015, a U.S. District Court judge issued an injunction blocking the implementation of more stringent rules related to underground injections, including fracking.

More recently, the BLM filed an appeal in the 10th Circuit Court of Appeals seeking an end to the injunction that issued after a number of states, including Colorado, North Dakota, Utah and Wyoming, brought a legal challenge against the agency's proposed rules. The states contend not only that they have regulatory authority over oil and gas activity, but they are more effective than the federal government. The dispute centers on provisions of the 2005 Safe Drinking Water Act, which generally bars the federal government from regulating underground injections.

These states argue that BLM oversight in this regard would create confusion. In addition, the increased costs associated with compliance to potentially conflicting federal regulations would be a disincentive to the progress in energy production brought on by the fracking boom. Wyoming Governor matt Mead recently said that his state was far ahead of the federal government with respect to oil and gas regulation.

“I think we can show consistently that the state can do it better than the federal government,” said Mead.

Industry Downturn

The battle between the states and the BLM comes in the midst of the downturn in the oil and gas industry. The success of the fracking boom has been short lived,  due in part to OPEC's inability to reach an agreement on limiting production. The glut in the oil supply has pushed prices to levels that have squeezed profit margins.

This development is also coupled with the increased regulatory costs that have made coal a less viable source of energy. Wyoming has been hit hard largely because if its reliance on coal for energy production, and the governor argues the BLM's push in the regulation of oil and gas on federal lands would be more of a burden to an industry that is already reeling.

The decline in the use of coal along with the downturn  in oil has not only affected Wyoming, but the broader energy sector across the country. Whether the BLM will prevails in its efforts remain to be seen, but the energy sector has hit a rough patch that will inevitably result in more bankruptcies and a wave of oil and gas disputes. An energy company that hopes to weather the storm should engage the services of an attorney with  industry expertise.