Judge Strikes Down US Policy on O&G Permits

WASHINGTON (Dow Jones Newswires), Aug. 15, 2011

A federal judge has struck down an Obama administration policy related to drilling permits on public lands, leading oil and gas companies to hope more permits in the western U.S. will be forthcoming.

But it wasn't clear Monday how the Interior Department, which processes the permits, would respond. The ruling, issued Friday by the U.S. District Court in Wyoming, rejected a policy that had required more extensive environmental review of some drilling permits.

Interior "had no authority" to adopt the policy last year "without public notice and an opportunity for comment," Judge Nancy D. Freudenthal wrote. She ruled in favor of an industry group and vacated the policy nationwide.

An Interior Department spokesman said the agency was reviewing the ruling and declined to comment further.

The ruling "holds the promise of new jobs and economic growth," said Kathleen Sgamma, director of government and public affairs for the Western Energy Alliance, which filed the suit and represents Devon and Anadarko, among others.

Permitting on U.S. land quickened under the Bush administration and hit a peak during the 2007 fiscal year, when Interior approved 7,124 permits to drill for oil and gas on federal lands. The Obama administration, by contrast, approved 4,487 such permits in 2009 and 4,090 in 2010, according to data from Interior's Bureau of Land Management, or BLM.

Some of that drop can be attributed to lower demand as a result of the economic downturn, but the industry says permits are also taking longer to obtain.

For its part, BLM has argued that its new permitting policies are more efficient because a stronger up-front review will lead to fewer lawsuits and delays down the road.

At issue in Friday's court ruling was a provision in the 2005 Energy Policy Act that allowed oil and gas companies to skip federal environmental reviews under certain circumstances -- for example, if a well was being drilled from an existing site where drilling had occurred within the previous five years.

In May 2010, Interior instructed its staff to allow such exceptions under "extraordinary circumstances." Freudenthal said that decision amounted to an "about-face" from past practice, so the agency must formally propose the change and solicit public input.

Sgamma said she hoped Interior would rescind the current policy for now. The department might also keep it in place and appeal the ruling.

"It's not like we'll start to get permits quicker here on out in the short term," Sgamma said. "We'll have to wait to see what the government does."

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