When it comes to operating on federal lands, timing and know-how are everything. To develop federal oil and gas leases, operators need to conduct extensive due diligence to avoid permitting delays and to identify and mitigate potential litigation risks. This is particularly important for current areas of renewed focus for developing natural gas resources (e.g., Colorado, Utah, and northern New Mexico) that have not been subject to much development activity over the past eight years.
Regulatory certainty is a must for efficient business planning and allocation of capital. Unfortunately, operators are confronting an increasing array of environmental and regulatory issues at the federal level, as well as numerous legal challenges to federal lease sales that place the status of federal leases in jeopardy.
These issues can result in costly delays and serve only to increase uncertainties with respect to obtaining leases, lease access, and required permits and authorizations for development. It is important for oil and gas companies to be armed with a roadmap to navigate this increasingly complex legal landscape, as well as proactive strategies to obtain regulatory and business certainty.
At the macro level, the three most important issues to focus your due diligence efforts for federal mineral development include: (1) the governing federal land use plan; (2) the federal leases and underlying BLM lease sale; and, (3) resource issues that may impact access and permitting.
Federal Land Use Plans: A good starting point when conducting due diligence for federal minerals is the governing BLM Resource Management Plan (RMP) applicable to where the resources are located. A BLM RMP is a federal land use plan that details the various lease stipulations and surface access restrictions that may be in place, such as wildlife timing limitations on access and development, as well as other provisions and conditions that may be applicable to leasing and permitting. This evaluation, along with reviewing underlying environmental analyses, will also help you assess potential permitting issues that may result in delay and future litigation risks.
BLM Lease Sales: The next step in due diligence review is to review and analyze the decision and environmental documents related to the BLM oil and gas lease sale(s) where the leases were offered and sold. Almost every federal oil and gas lease sale since 2015 is subject to a legal challenge from anti-industry organizations. These lawsuits have delayed issuance of leases, and in some instances resulted in leases being rescinded or suspended pending further environmental review under the National Environmental Policy Act (NEPA). This evaluation will help identify and assess litigation risk, and potential delays in permitting.
Resource Issues: At the exploration and development stage, resource issues are a key driver in potential permitting delays, litigation risk, and resulting regulatory uncertainty. Key resource issues that face additional scrutiny and often involve legal challenges include sensitive wildlife and habitat, air quality and greenhouse gases, cultural resources, and proposed wilderness areas or other special designation areas. It is important for operators to understand these resources in advance of submitting permits to BLM so that potential issues of concern are proactively addressed and resolved to avoid permitting delays, and to minimize litigation risk.
Basic Checklist: The following due diligence and compliance checklist provides a general overview of additional issues that should be considered when buying federal assets and promulgating exploration and development plans.
Beatty & Wozniak, P.C., has extensive experience in helping operators navigate the complex landscape of federal minerals and resources. Please contact us to learn more. We look forward to helping you achieve your business goals and objectives.
Federal Oil and Gas Due Diligence and Compliance Checklist
I. Land Use Plans
- Current Land Use Plan and/or Resource Management Plan
- Is the RMP being revised?
- Is the RMP under a legal challenge?
- Areas open to oil and gas leasing
- Standard terms of the oil and gas lease form
- Subject to minor constraints Timing limits
- Major constraints (e.g., No Surface Occupancy)
- Closed to leasing (WSA, wilderness)
- Recommended or Required Mitigation Measures
- Other Land Management Considerations
- Areas designated in Areas of Critical Environmental Concern
- Critical and suitable habitats under Endangered Species Act
- Areas under protection in accordance with the National Historic Preservation Act
- Wild and scenic river designations
II. Federal Leases
- Legal Challenges to Underlying BLM Lease Sale?
- Held by Production?
- Primary Term remaining; Prior Lease Suspension?
- Prior or Current Legal Challenges to underlying Federal Lease Sale
- Lease Stipulations
III. Nation Environmental Policy Act
- Environmental Impact Statement for the governing RMP
- Other NEPA documents covering the subject lands
- Programmatic Environmental Impact Statement
- Environmental Assessment
- Categorical Exclusions
- Documentation of NEPA Adequacy
- Endangered Species Act conservation plans
- Pending litigation over any of these documents
IV. National Historic Preservation Act
- Potential to impact cultural properties
- Section 106 Compliance
- Consultation with the State Historic Preservation Officer
- Consultation with Native American Tribes
V. Endangered Species Act
- Designated threatened or endangered species
- Designated candidate species
- Designated critical habitat for threatened or endangered species
- Pending litigation over petitions to list species or critical habitat