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Minard Run Oil Company v. United States Forest Service

March 23, 2012

MINARD RUN OIL COMPANY, PENNSYLVANIA OIL AND GAS ASSOCIATION,
ALLEGHENY FOREST ALLIANCE, AND WARREN COUNTY, PLAINTIFFS,
v.
UNITED STATES FOREST SERVICE, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Judge McLaughlin

MEMORANDUM OPINION

McLAUGHLIN, SEAN J., J.

This matter is before the Court upon Plaintiff Pennsylvania Independent Oil and Gas Association's ("PIOGA") Motion for an Order to Show Cause Why Defendant Forest Service Should Not Be Held in Contempt ("Contempt Motion"). Having conducted a hearing, and for the reasons which follow, PIOGA's request that the Forest Service be held in contempt is denied.

BACKGROUND

Prior to 2009, access to private mineral rights in the Allegheny National Forest ("ANF") occurred as the result of a cooperative process between private mineral owners and the United States Forest Service ("Forest Service"):

Although the Service manages the surface of the ANF for the United States, mineral rights in most of the ANF are privately owned. Mineral rights owners are entitled to reasonable use of the surface to drill for oil or gas and from 1980 until recently the Service and mineral owners had managed drilling in the ANF through a cooperative process. Mineral rights owners would provide 60 days advance notice to the Service of their drilling plans and the Service would issue owners a Notice to Proceed (NTP), which acknowledged receipt of notice and memorialized any agreements between the Service and the mineral owner about the drilling operations.

Minard Run Oil Co. v. U.S. Forest Service, 2011 WL 4389220, *1 (3rd Cir. 2011) ("Minard Run III"). The cooperative process described by the Third Circuit derived from this court's decision in United States v. Minard Run Oil Co., 1980 U.S. Dist. Lexis 9570 (W.D. Pa. 1980) ("Minard Run I"). In Minard Run I, the court, recognizing that the owner of mineral rights has an "unquestioned right" to enter a property to access and extract his minerals, but must do so in a manner which reduces unnecessary disturbance of the surface estate, required oil and gas drillers to provide the Forest Service with five specific pieces of information "no less than 60 days in advance" of commencing drilling operations. Id. at *13, 19-20. This so-called "Minard Run framework" became standard practice in the ANF and governed relations between drillers and the Forest Service from 1980 until approximately 2009. See Minard Run III, 2011 WL 4389220, *3.

Unfortunately, this process began to unravel in 2009 when the Forest Service settled a lawsuit filed by the Sierra Club and the Forest Service Employees for Environmental Ethics ("FSEEE") by agreeing to perform an environmental analysis pursuant to the National Environmental Policy Act ("NEPA") prior to issuing NTPs for future drilling proposals. FSEEE, 2009 WL 1324154. Consistent with that Settlement Agreement, former (then current) Forest Supervisor Leanne Marten subsequently issued a statement (the "Marten Statement") indicating that the Forest Service intended to perform a forest-wide environmental assessment prior to authorizing activity on any future drilling proposals. See Minard Run II, 2009 WL 4937785 at *11-12. The Forest Service justified this hiatus on private drilling activities in the ANF by taking the position that mineral rights owners were required to obtain an NTP prior to making any changes to land in the ANF. Id. Owners of private mineral and gas rights in the ANF responded by filing an action in this Court seeking to enjoin the Forest Service from implementing the Settlement Agreement and the accompanying Marten Statement. See Minard Run II, 2009 WL 4937785.

On December 15, 2009, we issued a preliminary injunction order enjoining the Forest Service from "requiring the preparation of a NEPA document as a precondition to the exercise of private oil and gas rights in the ANF" and from "[e]nforcement of the forest-wide drilling ban in the ANF." See Minard Run II, 2009 WL 4937785 at *34. The preliminary injunction order further stated that "[p]roposals for drilling activity shall instead be processed forthwith in the same form and manner in which they had been prior to the inception of the drilling ban and consistent with the procedures set forth in [Minard Run I]." Id.

On January 12, 2010, Defendants filed a "Motion for Reconsideration or in the Alternative to Alter or Amend Judgment" ("Motion for Reconsideration"). In the Motion for Reconsideration, Defendants raised several grounds for reconsideration and alternatively requested that we "clarify the procedures for processing drilling proposals under the preliminary injunction order." (Memorandum in Support of Motion for Reconsideration or in the Alternative to Alter or Amend Judgment, Dkt. 48, p. 1). In a hearing on March 9, 2010, we denied Defendants' Motion for Reconsideration but offered the following, on the record, by way of clarification:

As has been recognized by all parties, my previous opinion reaffirmed what I referred to as the "Minard Run approach," which included a 60 day notice requirement derived from the holding in the prior Minard Run case. However, my order did not, and was not intended to, grant the drillers carte blanche to enter the ANF and commence drilling operations on the 61st day if unable to reach an accommodation with the Forest Service. This is because, while my opinion recognized that mineral estates are dominant, it also specifically held that Pennsylvania law requires the owner of the dominant mineral estate to exercise due regardfor the servient estate so as to avoid and prevent undue damage to the surface. I want to make it clear that forbearance on the part of the drillers during the initial 60 day is not in and of itself synonymous with "due regard." Depending upon the unique circumstances of any given case, a period of time longer than 60 days may be entirely appropriate and necessary in order for the dominant and servient estateholders to engage in a meaningful and cooperative accommodative effort.

If after a good-faith attempt a mutually acceptable accommodation cannot be reached, the Forest Service may, consistent with my previous opinion and, indeed, the action it took in Minard Run I, seek injunctive relief in an appropriate judicial forum to protect the surface estate. (Order on Motion for Reconsideration, 3/9/2010, Dkt. 59, pp. 8-9).

The Forest Service, Sierra Club, and FSEEE filed interlocutory appeals. On September 20, 2011 the Third Circuit unanimously affirmed the preliminary injunction. Minard Run III, 2011 WL 4389220, *1. The Third Circuit characterized the preliminary injunction as enjoining the Forest Service "from requiring the preparation of a NEPA document as a precondition to the exercise of private oil and gas rights in the ANF" and as requiring a "return to the 60-day cooperative framework for processing NTPs that had been in place prior to the FSEEE Settlement." Id. at 10. After reviewing applicable property law concerning split estates, the Court held:

[T]he Service does not have the broad authority it claims over private mineral rights owners' access to surface lands. Its special use regulations do not apply to outstanding rights and the limited regulatory scheme applicable to the vast majority of reserved rights in the ANF [limiting the Forest Service to "regulations contained in the written instrument of conveyance"] does not impose a permit requirement. Although the Service is entitled to notice from owners of these mineral rights prior to surface access, and may request and negotiate accommodation of its state-law right to due regard, its approval is not required for surface access. An NTP is an acknowledgment that memorializes any agreements between the Service and a mineral rights owner, but it is not a permit. Accordingly, in the record before it, the District Court properly concluded that issuance of an NTP is not a "major federal action" under NEPA and an EIS need not be completed prior to issuing an NTP.

Id. at *10-12 (emphasis supplied).

On July 15, 2011, PIOGA filed the instant motion to hold the Forest Service in contempt of this Court's preliminary injunction order. In the Contempt Motion, PIOGA argues that the Forest Service has violated the preliminary injunction by (1) refusing to allow PIOGA member Shell Western Exploration and Production, Inc. ("SWEPI") to utilize groundwater located on ANF land in the production of gas contained in Marcellus shale deposits, and (2) "engaging in a pattern of unwarranted and increasing delays before issuing [NTPs] for private oil and gas developments on split estates." (See PIOGA's Post-Hearing Proposed Findings of Fact and ...


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