Pennaco Energy v. U.S. Dept. of Interior

• Decision Date: 10 August 2004
• Docket Number: No. 03-8062.,03-8062.
• Citation: 377 F.3d 1147
• Parties: PENNACO ENERGY, INC., Plaintiff-Appellee, Petroleum Association of Wyoming; State of Wyoming; Nance Petroleum Corporation, Plaintiffs-Intervenors-Appellees, v. UNITED STATES DEPARTMENT OF the INTERIOR, Defendant, and Wyoming Outdoor Council; Powder River Basin Resource Council; Natural Resources Defense Council; Defenders of Wildlife, Defendants-Intervenors-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

377 F.3d 1147

PENNACO ENERGY, INC., Plaintiff-Appellee Petroleum Association of Wyoming; State of Wyoming; Nance Petroleum Corporation, Plaintiffs-Intervenors-Appellees, v. UNITED STATES DEPARTMENT OF the INTERIOR, Defendant, and Wyoming Outdoor Council; Powder River Basin Resource Council; Natural Resources Defense Council; Defenders of Wildlife, Defendants-Intervenors-Appellants.

No. 03-8062.

United States Court of Appeals, Tenth Circuit.

August 10, 2004.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the District of Wyoming, Clarence A. Brimmer, J.

Susan D. Daggett (Keith G. Bauerle, with her on the briefs), Earthjustice, of Denver, CO, for the defendants-intervenors-appellants.

Charles L. Kaiser, Davis Graham & Stubbs LLP, of Denver, CO, (Kirby J. Iler, Pennaco Energy, Inc., of Cody, WY, and Charles A. Breer, Davis Graham & Stubbs LLP, of Denver, CO, with him on the brief), for the plaintiff-appellee.

Patrick J. Crank, Wyoming Attorney General, Jennifer A. Golden, Deputy Attorney General, and Vicci M. Colgan and John S. Burbridge, Senior Assistant Attorneys

General, Cheyenne, WY, on the brief for plaintiff-intervenor-appellee State of Wyoming.

Before SEYMOUR, EBEL, and BRISCOE, Circuit Judges.

BRISCOE, Circuit Judge.

Plaintiff Pennaco Energy, Inc. (Pennaco), brought this suit in the District of Wyoming, pursuant to the Administrative Procedures Act, 5 U.S.C. §§ 701-06(APA), against the United States Department of the Interior (DOI) to challenge a decision of the Interior Board of Land Appeals (IBLA). The challenged IBLA decision reversed a decision of the Bureau of Land Management (BLM) to auction three oil and gas leases (successfully bid upon by Pennaco). The IBLA concluded the requirements of the National Environmental Policy Act (NEPA) had not been satisfied prior to issuing the leases and remanded the matter to the BLM for additional appropriate action. The State of Wyoming, the Petroleum Association of Wyoming, and Nance Petroleum Corporation intervened on behalf of Pennaco in the district court. Several environmental groups intervened to defend the IBLA decision: Wyoming Outdoor Council, Powder River Basin Resource Council, Natural Resources Defense Council, and Defenders of Wildlife (the Councils). The district court reversed the decision of the IBLA and reinstated the BLM's decision to issue the leases. The Councils bring this appeal. We exercise jurisdiction pursuant to 28 U.S.C. § 1291 and reverse and remand.

I.

The factual and procedural background of this case is best understood in the context of the relevant statutes and regulations.

National Environmental Policy Act

The NEPA, 42 U.S.C. §§ 4321-70, "prescribes the necessary process" by which federal agencies must "take a `hard look' at the environmental consequences" of the proposed courses of action. Utahns for Better Transp. v. U.S. Dept. of Transp., 305 F.3d 1152, 1162-63 (10th Cir.2002). "[T]he statute does not impose substantive limits on agency conduct." Friends of the Bow v. Thompson, 124 F.3d 1210, 1213 (10th Cir.1997) (citing Robertson v. Methow Valley Citizens' Council, 490 U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989)). "Rather, once environmental concerns are `adequately identified and evaluated' by the agency, NEPA places no further constraint on agency actions." Id. (quoting Robertson, 490 U.S. at 350, 109 S.Ct. 1835).

For proposed "major Federal actions significantly affecting the quality of the human environment," agencies must prepare an environmental impact statement (EIS) in which they consider the environmental impact of the proposed action and compare this impact with that of "alternatives to the proposed action." See 42 U.S.C. § 4332(2)(C). In order to provide "a clear basis for choice among options by the decisionmaker and the public," an agency's EIS must consider the "no action" alternative. 40 C.F.R. § 1502.14; see id. (d) (EIS shall "[i]nclude the alternative of no action").

"Agencies `need not prepare a full EIS,' however, if they initially prepare the less detailed environmental assessment (`EA') and, based on the EA, issue a `finding of no significant impact' (`FONSI'), concluding that the proposed action will not significantly affect the environment." Lee v. United States Air Force, 354 F.3d 1229, 1237 (10th Cir.2004) (quoting S. Utah Wilderness Alliance v. Norton, 301 F.3d 1217, 1237 (10th Cir.2002)); see also 40 C.F.R. § 1501.4 (providing the agency shall prepare an EA to determine whether an EIS is required). Further, an agency need not prepare a new EIS to address a proposed action as long as it already has taken a "hard look" at the action's potential environmental consequences. See Kleppe v. Sierra Club, 427 U.S. 390, 410, n. 21, 96 S.Ct. 2718, 49 L.Ed.2d 576 (1976) (stating "[t]he only role for a court is to insure that the agency has taken a `hard look' at environmental consequences"); Hodges v. Abraham, 300 F.3d 432, 448-49 (4th Cir.2002) (concluding new NEPA documents not required when proposed action did not create "new environmental picture from that previously studied" and previous NEPA documents allowed agency to take "hard look" at potential environmental impacts of proposed action); Park County Res. Council, Inc. v. United States Dep't of Agric., 817 F.2d 609, 620 (10th Cir.1987) ("NEPA requires only that an agency take a `hard look' at the environmental consequences of any major federal action.").

Regulations require agencies to supplement an existing EIS through a Supplemental Environmental Impact Statement (SEIS) when "[t]he agency makes substantial changes in the proposed action that are relevant to environmental concerns," 40 C.F.R. § 1502.9(c)(1)(i), or when "[t]here are significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts." Id. § 1502.9(c)(1)(ii).

Courts have upheld the use of non-NEPA procedures "for the purpose of determining whether new information or changed circumstances require the preparation of a supplemental EA or EIS." Idaho Sporting Cong. Inc. v. Alexander, 222 F.3d 562, 566 (9th Cir.2000); see, e.g., Marsh v. Oregon Natural Res. Council, 490 U.S. 360, 383-85, 109 S.Ct. 1851, 104 L.Ed.2d 377 (1989) (upholding decision of Army Corps of Engineers to proceed with dam project without supplementing existing NEPA documents, where Corps used a "supplemental information report" to analyze significance of new reports questioning environmental impact of project); Friends of the Bow, 124 F.3d at 1218-19 (upholding decision of Forest Service to proceed with logging project without supplementing existing NEPA documents where agency used supplemental information report to evaluate significance of new information about area to be logged).

Oil and gas leasing decisions

The DOI manages the use of federal oil and gas resources through a three-phase decision-making process. At the earliest and broadest level of decision-making, the DOI develops land use plans — often referred to as resource management plans (RMPs). See Norton v. S. Utah Wilderness Alliance, ___ U.S. ___, ___, 124 S.Ct. 2373, 2377, 159 L.Ed.2d 137 (2004) (citing 43 C.F.R. § 1601.0-5(k)). "Generally, a land use plan describes, for a particular area, allowable uses, goals for future condition of the land, and specific next steps." Id. Under the Federal Land Policy and Management Act (FLPMA), "[t]he Secretary [of Interior] shall manage the public lands under principles of multiple use and sustained yield, in accordance with the land use plans ... when they are available." 43 U.S.C. § 1732(a).

Once an RMP has been issued, "subsequent more detailed or specific planning, shall conform to the [RMP]." 43 C.F.R. § 1610.5-3(a). In the context of oil and gas development, the BLM is initially charged with determining whether the issuance of a particular oil and gas lease is consistent with the RMP. The lessee must obtain BLM approval of an Application for Permit to Drill (APD) before commencing any "drilling operations" or "surface disturbance preliminary thereto." 43 C.F.R. § 3162.3-1(c).

II.

BLM's decision to auction leases

At issue in this case is whether the BLM satisfied the NEPA prior to auctioning three oil and gas leases on February 1, 2000, for the development of tracts of land in the Powder River Basin in Wyoming.¹ In August 1999, interested parties nominated 49 parcels of land for inclusion in the next available oil and gas lease sale. It is undisputed that the planned use of the leases was the extraction of coal bed methane (CBM). It is also undisputed that a CBM exploration and development boom is occurring in the Powder River Basin. The hotly contested issue underlying this case is whether the environmental impacts of CBM development are significantly different than the environmental impacts of non-CBM oil and gas development.

On September 28, 1999, Richard Zander, the acting field manager of the BLM Buffalo Field Office, prepared separate but identical Interim Documentation of Land Use Conformance and NEPA Adequacy worksheets (DNAs) for each of the 49 nominated parcels. DNAs are forms designed to allow BLM employees to determine whether they properly can rely on existing NEPA documents. In this case, Zander concluded that two existing NEPA analyses (the Buffalo Resource Management Plan EIS (Buffalo RMP EIS) and the Wyodak Coal Bed Methane Project Draft EIS (Wyodak DEIS)) satisfied the NEPA requirements with regard to issuance of the leases.

The first document relied upon by Zander, the Buffalo RMP EIS, was published in October 1985 in conjunction with the development of the Buffalo RMP. In the Buffalo RMP EIS, the BLM discussed the potential environmental impacts of oil and gas development within the Buffalo Resource Area, an area encompassing the three parcels at issue in this case. However, the Buffalo RMP EIS did not specifically address CBM extraction.

The second document relied upon...