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Federal Government Trying to Back Out of Leases

by Elizabeth Alford on March 1, 2016

Can the government cancel an oil and gas lease when the driller hasn’t done anything wrong? This is the basic question being asked in several high profile lawsuits this year.

Related: Hiring an Attorney for an Oil & Gas Lease

In March of 2015, the Bureau of Land Management (BLM) finalized new rules designed to regulate hydraulic oil and gas fracturing on public lands. This move set off a firestorm of protest and legal battles. At the heart if these disputes is whether the government has the power to revoke property rights. Following are some noteworthy examples from three different states:

  • Montana: The Department of the Interior announced earlier this year that is is considering canceling a lease near tribal lands in Montana.
  • Oklahoma: A federal judge recently moved to scrap an Osage Nation lease for inadequate environmental review, which has left open the question of whether similar oil and gas leases are valid
  • Colorado’s:The Bureau of Land Management announced last week that it plans to cancel 25 oil and gas leases in Colorado’s White River National Forest.

Industry leaders are crying foul, calling these dangerous precedents that leave open the question of whether similar oil and gas leases are valid. One industry attorney charged the agencies with basically double-crossing drillers by shrinking back once they begin to take fire from environmental groups. But with a lease in hand, drillers are demanding that their rights not be trampled.

John Leshy, attorney for the Dept of Interior during the Clinton Administration told EnergyWire that the “legal standard is somewhat muddy but ultimately favors agency authority. It’s slightly gray, but I think it’s pretty black and white”. He went on to say that any legal ambiguity here should ultimately favor the public interest.

This fight is a long way from being over and insiders say that, at a bare minimum, the Interior Department needs to have a compensation plan if they are going to reverse course on leases that have already been issued.

 

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