1. ATLANTA AUSTIN GENEVA HOUSTON LONDON NEW YORK SACRAMENTO WASHINGTON DC
On June 24, the Obama Administration filed its notice of appeal to challenge last
week’s federal court decision to strike down the newest regulation over hydraulic
fracturing on federal and Indian lands by the Bureau of Land Management
(BLM) as being “in excess of its statutory authority… and unlawful.” On June 21,
District Court Judge Scott Skavdahl (Wyoming) issued the opinion detailing the
limited authority of the executive branch to regulate activities absent
congressional authority.
Background
In May 2012, the BLM issued proposed rules to regulate hydraulic fracturing on
federal and Indian lands. The generally stated purpose was to (i) publicly
disclose the chemicals used in hydraulic fracturing, (ii) protect water supplies by
strengthening well-bore integrity regulations, and (iii) ascertain environmentally
responsible management of fluids that flow back to the surface during hydraulic
fracturing. The proposed rules endured two public comment periods that
generated more than 1.5 million comments and resulted in two revisions over
three years.
In March 2015, the BLM issued its final “Fracking Rule” to become effective in
June 2015. In response, petitions seeking judicial review were filed by industry
petitioners alongside the states of Wyoming, Colorado, North Dakota and Utah,
and the Ute Indian Tribe of the Uintah and Ouray Reservation. The court
postponed the effective date of the Fracking Rule and later granted preliminary
injunctions enjoining the BLM from enforcing the Fracking Rule until the court
fully considered the merits of the petitioners’ challenges.
Analysis
The court initially reviewed the two-step process necessary to decide if an
administrative agency had the authority to regulate a particular activity. First, the
court must determine if Congress has spoken to the precise question at issue. If
so, the Court must give effect to the unambiguously expressed intent of
Congress. Second, if Congress has not specifically addressed the precise
question at issue, the court then gives deference to the agency’s statutory
construction.
Judge Skavdahl, in a fairly detailed opinion, found that the BLM did not have the
authority necessary to issue the Fracking Rule. Indeed, the court left no room for
federal agency deference on hydraulic fracturing. The court found that Congress
had spoken directly to this issue and unambiguously expressed its intent to
exclude hydraulic fracturing from federal agency authority under the Energy
Policy Act of 2005 (EP Act). The court declared the Fracking Rule unlawful and
Related People/Contributors
• David A. Baay
• Jim L. Silliman
Legal Alert: Administration Signals Intent to
Challenge Judicial Decision That Struck
Down Fracking Rule as Unlawful
June 30, 2016

2. ATLANTA AUSTIN GENEVA HOUSTON LONDON NEW YORK SACRAMENTO WASHINGTON DC
stated that “the intent of Congress is clear, so that is the end of the matter.”
In reaching this conclusion, the court provided some historical context. In 1974,
Congress enacted the Safe Drinking Water Act (SDWA) that served to protect
drinking water sources by regulating “underground injections” (defined as “the
subsurface emplacement of fluids by well injection”). For two decades, the
Environmental Protection Agency (EPA) interpreted “underground injection” to
exclude regulation of hydraulic fracturing. In 1997, the U.S. Court of Appeals for
the Eleventh Circuit then concluded that the unambiguous language of the
statute made clear that Congress intended the EPA to regulate all underground
injections including hydraulic fracturing.
In turn, the EPA maintained regulatory authority over hydraulic fracturing until
Congress enacted the EP Act in 2005. The act was intended to expedite oil and
gas development in the United States. Congress recognized the EPA’s authority
to regulate hydraulic fracturing under the SDWA. It therefore included an SDWA
amendment to expressly and unambiguously revise the definition of
“underground injection” to exclude “the underground injection of fluids or
propping agents (other than diesel fuels) pursuant to hydraulic fracturing
operations related to oil, gas, or geothermal production activities.” The court
reasoned that the EP Act’s explicit removal of the EPA’s authority similarly
precluded the BLM from regulating the activity under a more general statute.
The court analyzed BLM’s long list of dated statutes in its “attempted […] end-
run around the 2005 EP Act.” The court ultimately explained how the “regulation
of an activity must be by Congressional authority, no administrative fiat,” and
that “[w]hen an agency claims to discover in a long-extant statute an unheralded
power to regulate ‘a significant portion of the American economy, [the court]
typically greet[s] its announcement with a measure of skepticism. [The court]
expect[s] Congress to speak clearly if it wishes to assign to an agency decisions
of vast ‘economic and political significance.’” The court held that the BLM lacked
congressional authority to promulgate the Fracking Rule and therefore rendered
it unlawful.
Appeal
On June 24, a notice of appeal to the U.S. Court of Appeals for the Tenth Circuit
was filed by the Secretary of the Department of the Interior and the Director of
the BLM. This notice simply secures their right to an appeal and includes no
information on their specific intent or basis for an appeal.
Looking Forward
Standing alone, the court’s decision ought to bolster confidence within the
fracking industry that encroaching regulations are held at bay for now. That
confidence, however, may be placed in limbo by a reacting anti-fracking
Legal Alert: Administration
Signals Intent to Challenge
Judicial Decision That Struck
Down Fracking Rule as
Unlawful
continued

3. ATLANTA AUSTIN GENEVA HOUSTON LONDON NEW YORK SACRAMENTO WASHINGTON DC
movement spurred in response to this decision.
First, and most obvious, the Administration’s appeal injects a degree of
uncertainty in the long journey toward a resolution of fracking regulations. It also
signals a potential short-term run at securing fracking regulations before the
presidential election this fall. It will be interesting to watch for any signals by the
Administration on its intent to advance the appeal in the coming weeks or
months.
Second, the court expressly stated that the issue before the Court was not
whether hydraulic fracturing was “good or bad,” but rather an analysis forced by
laws enacted by Congress. This view signals an obvious workaround of the
court’s decision—namely by way of legislation. The fracking industry should
certainly expect increased legislative efforts on Capitol Hill by the anti-fracking
movement to directly regulate and/or authorize the BLM to regulate the fracking
industry.
If you have any questions about this Legal Alert, please feel free to contact any
of the attorneys listed under 'Related People/Contributors' or the Sutherland
attorney with whom you regularly work.
Legal Alert: Administration
Signals Intent to Challenge
Judicial Decision That Struck
Down Fracking Rule as
Unlawful
continued