Oil, Gas and Mineral Extraction on Public Lands - Module 5 of 5

Oil, Gas and Mineral Extraction on Public Lands

            The federal government gives private citizens the right to explore and extract subsurface minerals on publicly-owned lands through programs established by federal land use laws and administered by the U.S. Forest Service and the Bureau of Land Management. This module discusses the administrative structure regulating the management of private oil or gas exploration and extraction on public land. This includes an overview of the administrative agencies and programs and key federal laws that apply to natural resource extraction on federal lands.

Federal Land Policy and Management Act and the National Environmental Policy Act

While several statutes directly regulate oil, gas, and mineral development on federal land, all decisions must comply with two keystone federal land use laws: the Federal Land Policy and Management Act and the National Environmental Policy Act.

Congress enacted the Federal Land Policy and Management Act in 1976.[1] Its goal was to retain public lands for so-called “multiple use management.”[2] In the years that followed, the Supreme Court clarified that multiple use management required administrative agencies to strike a balance between the competing uses to which federal lands can be applied. In other words, to make reasonable land use policy decisions, regulators must balance the interests of those who enjoy public lands for recreation and conservation against those who rely on them for the extraction of natural resources.  

Federal land use policy encourages the economic use of public lands, but it does not allow for the extraction of resources if doing so poses a hinderance to other public uses. The Federal Land Policy and Management Act requires that administrative agencies regulate natural resource extraction to protect future use. In fact, it significantly limits natural resource extraction on public lands by requiring the Bureau of Land Management to deny natural resource extraction proposals that are unnecessary or that could cause “undue degradation” to the environment.[3] Additionally, for proposed mining operations that would be conducted in certain categories of sensitive lands, the Act requires that the Bureau deny any proposed natural resource extraction operations that could cause “undue impairment.”[4] These limitations require the Bureau to impose protective conditions on oil, gas, and mineral operations on federal lands, but the bounds of these constraints are unclear.

The Supreme Court provided some clarification regarding what sorts of activities fall within the prohibition on environmental degradation imposed by the law. In Mineral Policy Center v. Norton, the Supreme Court established the parameters of the “unnecessary and undue degradation” standard. The Court instructed the Bureau of Land Management to prevent both “unnecessary degradation” and damaging impacts of activities even if necessary to a mining or extraction operation if they still cause excessive environmental impacts.[5] Thus, the Mineral Policy Center decision confirmed the Bureau of Land Management’s broad authority to reject resource extraction plans that “would unduly harm or degrade the public land” that they are to be located on.[6]

The National Environmental Policy Act requires federal agencies to prepare an Environmental Impact Study before carrying out any federal action that significantly affects the environment. Because private natural resource extraction on public lands is carried out pursuant to a federally-issued license, most oil, gas, and mineral extraction operations require an Environmental Impact Study. While the Act does not expressly prohibit an oil, gas, or mineral extraction project from moving forward if environmental impacts are found, it may uncover environmental issues that would prevent development based on the prohibitions of other federal environmental laws.[7]  

The Federal Land Policy and Management Act and the National Environmental Policy Act, which we’ll refer to as “NEPA,” direct federal land management policy. Congress enacted the Federal Land Policy and Management Act to provide the Bureau of Land Management with a legal structure for managing federal lands. [8] Likewise, Congress passed NEPA to ensure that environmental impacts of leases are considered before they are issued – a critical step in preserving the value of the land’s use for the future. These laws provide some insight to the competing interests at stake in major federal land use policy. To balance these priorities, the administrative agencies charged with overseeing natural resource extraction on public lands rely on standard processes to help them make decisions about natural resource extraction on public lands.

Regulating Oil, Gas, and Mineral Extraction on Public Lands

Since the passage of the Federal Lands Management Act, Congress has delegated the authority for overseeing these programs to a handful of administrative agencies. These agencies impose conditions on natural resource extraction from public lands, which vary depending upon the type of development that is sought, ecological concerns and financial considerations.

The Department of the Interior holds the principal authority for managing leasable minerals on public and tribal lands. The United States Forest Service and the Bureau of Land Management are agencies within the Department of the Interior that are responsible for overseeing the exploration, lease and sale of lands for oil, gas, and mineral extraction.

The Bureau of Land Management manages the federal government’s onshore subsurface mineral estates, which total about 700 million acres, or about 30% of the total land mass of the United States.[9] Likewise, the Forest Service manages access to, and development of, federal oil and natural gas resources on approximately one-third of the over 150 national forests and grasslands.[10]   

The administrative agencies that oversee oil, gas, and mineral extraction activities on public lands are responsible for managing natural resource extraction according to the requirements of federal land use plans. When mineral leases occur on National Forest System lands, for example, the Forest Service and the Bureau of Land Management work together to manage mineral leasing based on applicable laws and regulations designed to protect the recreational use and conservation of these lands.[11] Likewise, the Federal Onshore Oil and Gas Leasing Reform of 1987 established environmental policies to help the Forest Service determine whether publicly owned lands under its jurisdiction should be leased for oil and gas development.[12] Oil, gas, and mineral deposits on federal lands can be extracted by private citizens pursuant to a license, permit or lease issued by a public agency of proper authority. The process of obtaining a permit or lease depends upon the policies of the federal agency that has jurisdiction over the affected land.

Oil, Gas, and Mineral Leases and Permits on Public Lands

The Mineral Lands Leasing Act, passed in 1920, established that citizens of the United States may obtain prospecting permits or leases for coal, gas, oil, oil shale or other valuable mineral deposits on federal lands.[13] The Bureau of Land Management issues the permits or leases for most federal lands, and if the land is designated as a national forest, the agency must consult with the Forest Service before making a final determination.[14]  

When federal lands are considered for natural resource development, administrative agencies first make a determination of which federal lands should be made available.[15] Certain federal lands are not eligible for mineral leasing, including lands recommended for wilderness designation or wilderness study areas.[16] The Forest Service makes a determination after a NEPA analysis is conducted and a Land and Resource Management Plan is prepared.[17] The Forest Service notifies the Bureau of Land Management of the areas that are open to development and the Bureau of Land Management may then move forward with issuing a mineral rights lease.[18]

To obtain a lease for subsurface mineral extraction, an applicant must send an informal request, known as an Expression of Interest, to the Bureau of Land Management. The expression of interest identifies the parcel of land the applicant wishes to use for development. If the agency finds that the land is suitable for exploration operations, the prospective lessee must then apply for a permit to drill. The Bureau of Land Management is responsible for the final approval of the application for a permit to drill, but the Service is responsible for the final approval of the Surface Use Plan of Operation, which describes the activities that will take place. The plan is submitted as a component of the Application for a permit to drill. The Forest Service, after reviewing the plan, returns a decision of approval, approval with conditions or disapproval.[19]

If a plan is not required, the Bureau of Land Management reviews the application for a permit to drill for potential subsurface impacts, and then the agency can issue an approval on its own accord. Following the approved application, both the Bureau of Land Management and Forest Service post a 30-day public notice of all approved applications for permits to drill.[20] Once all approvals are received and the public notice period expires, the potential natural resource extractor is issued a lease, giving it access to the subsurface minerals on federal property.[21]

Once the Bureau of Land Management issues a lease, a potential driller must still apply for permission before extraction activities begin. When an application for permission is received, the reviewing agency must provide a public notice and comment period of at least 30-days. The agency must post a narrative description of the proposed action, along with a map and description of the area to be affected, in local offices, to give the community the chance to respond.  

After an application for permission has been approved, the applicant must submit a complete plan of action, including a reclamation plan, to the Bureau of Land Management. Next, the applicant must post a bond, ensuring the eventual reclamation of all land affected by the proposed drilling as well as any affected water resources.[22] Once the lease, permit and bond are secured, natural resource development activities can commence.

The current system has functioned in its current form for decades, but the government recently announced plans to revise regulations on leasing lands for extraction. As of early 2019, the Forest Service is moving forward with a new rule regarding minerals and other oil and gas resources on national forest lands, as many consider the current process outdated and inefficient. As of early, 2019, the government is trying to manage a backlog of 2,000 pending expressions of interest across 2 million acres of federal land.[23] The Forest Service recently proposed amendments to clarify regulations, increase consistency in interagency processes and streamline the agency’s approach to oil, gas, and mineral extraction nationwide.[24]

Federal Laws Affecting Oil, Gas, and Mining on Public Lands

Other key federal statutes also regulate the issuance of leases. In addition to the NEPA analysis, lease approvals are subject to conditions applied by the Endangered Species Act, the National Historic Preservation Act and the Clean Water Act.[25]  Congress has also passed other laws specific to some incidences of mining and fossil fuel extraction, including the General Mining Law, the Mineral Lands Leasing Act and the Federal Onshore Oil and Gas Leasing and Reform Act.

The General Mining Law of 1872 was the first federal law directly governing the private extraction of minerals on federally-owned lands. The General Mining Law afforded citizens the opportunity to explore for, discover and purchase rights to valuable mineral deposits on federal lands. In so doing, the law declared that “[a]ll valuable mineral deposits in lands belonging to the United States…[shall be] free and open to exploration, an [sic] purchase, and the lands in which they are found to occupation and purchase.”[26] Notably, the General Mining Law does not apply to all commercially-valuable minerals.  

Under the General Mining Law, a citizen of the United States may purchase a title to unappropriated federal land if she discovered certain valuable mineral deposits on the property. To establish ownership of minerals under the General Mining Law, a prospector must complete a four-step process. First, she must discover a “valuable mineral deposit” in a category of specific materials including asphalt, cement, diamonds, marble, salt, uranium, copper, gold, lead, silver and zinc. Second, the prospector must identify all mining claims by posting notice and marking claim boundaries. Next, she must record claims by filing a “location certificate” with the Bureau of Land Management within 90 days of the discovery of valuable mineral resources. From there, she is responsible for maintaining the claim by filing the proper paperwork, maintaining activity on the site, and paying an annual fee. The individual or corporation that discovers a valuable mineral is endowed with the exclusive right to possess the mineral deposit so long as the boundaries of the location were properly marked, and the prospector invested at least $100 worth of labor each year into the development of the area.[27]  

The General Mining Law may have laid the framework for mining on public lands, but it was passed with a limited scope. For example, the law does not apply to minerals such as sand, gravel or stone, or to organic compounds such as coal, oil and gas. The extraction of these resources is governed by other laws and regulations, such as the Mineral Lands Leasing Act of 1920. The Mineral Lands Leasing Act allows any citizen of the United States to obtain a prospecting permit or lease for the extraction of oil, gas, and minerals on public land.   

Amendments and subsequent laws have clarified the bounds of when it’s appropriate for a federal agency to issue mineral leases and extraction permits for these commodities. The Federal Onshore Oil and Gas Leasing and Reform Act of 1987, for example, made three fundamental alterations to the Mineral Land Leasing Act of 1920. First, it established that all land offered for lease must be offered on a competitive basis, and thus cannot be offered to just one individual or corporation. Additionally, it requires an applicant for a drilling operation to submit a plan of operations and reclamation prior to ground operations. Third, the Reform Act adds to the Mineral Leasing Act’s provisions concerning fraud in the sale of federal oil and gas leases and alters the payment structure for leases and permits.[28]

Conclusion

Natural resource extraction on federal lands generates billions of dollars in revenue and millions in revenue for local, state, and federal governments. Oil, gas, and valuable minerals extracted from federal lands support a great deal of our economic activity, but mining and extraction operations also potentially interfere with the recreational and environmental value of federal lands. To ensure that natural resources are extracted from public lands in a manner that conforms with federal land use policy, the federal government has established statutory and regulatory parameters that prescribe how, when, by whom, and under what circumstances oil, gas, and mineral extraction can take place on federally-owned lands.  

Thank you for participating in the LawShelf video-course on oil, gas and natural resources. This important sub-area of property and environmental law helps control the enormous natural resource industry in the United States, while maintaining important environmental protections. Best of luck and please let us know if you have any questions or feedback.