Environment & Energy Report

Trump Administration Defends Cancellation of Oil and Gas Lease

Jan. 21, 2020, 4:51 PM

Government lawyers appeared in court to take a position uncommon under the Trump administration: An oil company shouldn’t get to drill on a contested slice of public lands.

The U.S. Court of Appeals for the District of Columbia Circuit on Tuesday heard the argument in a long-running case involving Reagan-era leasing of Montana land considered sacred by the Blackfeet Nation. The Obama administration in 2016 canceled the most contentious lease, held by the small Louisiana company Solenex LLC.

The outcome of the litigation could affect the ability of future administrations to scotch leases the Interior Department is issuing today.

Justice Department lawyer Brian C. Toth said the D.C. Circuit “should take the opportunity to squarely reject those arguments” that the government lacks authority to nix a lease that violated federal law in the first place.

“The legal validity of the lease has been in question for decades,” he said.

The Trump administration’s support of the Obama-era move comes despite the fact that the Bureau of Land Management’s current active head, William Perry Pendley, previously represented Solenex in the case.

Decades of Limbo

The Trump administration’s effort to keep Solenex from drilling on the land contrasts with its broader push to streamline oil and gas development—especially given Pendley’s experience representing Solenex through his old law firm, the Mountain States Legal Foundation. He is now recused from proceedings related to Solenex and the firm.

The 6,200-acre undeveloped lease at issue is in the Badger-Two Medicine area of Lewis and Clark National Forest, a broad swath of public land beneath Glacier National Park in Montana. The neighboring Blackfeet Nation considers the area sacred, the site of the tribe’s origin story.

Solenex’s predecessor picked up the lease in 1982 during a public lands development push by then-Interior Secretary James Watt.

Interior leased the area without in-depth review under the National Environmental Policy Act and the National Historic Preservation Act, a move that set off decades of litigation from environmental groups, tribal advocates, and would-be drillers.

Solenex’s lease and others in the area were suspended before development could start. Other drillers have since relinquished their parcels, and the Obama administration ultimately scrapped the remaining few.

The U.S. District Court for the District of Columbia in 2018 reversed the cancellation, ruling that Interior waited too long to take action and unfairly left Solenex in limbo.

Courtroom Debate

Much of Tuesday’s arguments centered on Solenex’s “reliance interests"—the extent to which the company made decisions and investments based on the expectation it could ultimately develop the Montana lease. The district court’s decision was based largely on these interests.

Mountain States Legal Foundation lawyer David McDonald, representing Solenex, told the court Interior’s move was an “abrupt and unexplained departure” from the agency’s previous practice.

But Chief Judge Merrick B. Garland, an appointee of President Bill Clinton, appeared unconvinced, noting that legal precedent requires reliance interests to be spelled out very specifically, and that Solenex hadn’t gone into detail on the issue in its legal filings.

He added that Interior acknowledged the driller’s costs and agreed to refund more than $30,000 in lease payments.

Earthjustice attorney Timothy Preso, representing environmental intervenors in the case, said Solenex could attempt to recover more money from the government in the U.S. Court of Federal Claims instead of taking aim at the agency’s authority to protect the public’s interest on public lands.

The panel of judges also wrestled with the driller’s argument that the cancellation was unexpected. Judge Patricia A. Millett, an Obama appointee, noted that Interior hadn’t been explicit that it might cancel the lease. But, she said, the decades of administrative and court proceedings on the lease signaled that it wasn’t “rock solid.”

Judge David S. Tatel, a Clinton appointee, also sat on the panel. A decision is expected in the next few months.

The case is Solenex v. Bernhardt, D.C. Cir., No. 18-5345, oral arguments 1/21/20.

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Chuck McCutcheon at cmccutcheon@bloombergenvironment.com

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