A coal company and an oil and gas company are stuck in legal limbo over who has superior rights on overlapping federal leases in the Powder River Basin. The case has been bandied back and forth in federal court, state court, district court… but in the end, who should settle this debate? Cheyenne oil and gas attorney Kris Koski, who is not involved in the case, helps give deeper analysis about what the controversy and potential resolution means for Wyoming.
Let’s start by getting into the background on this case. Can you talk about who the players are and give a little foundation to what’s going on here?
It’s a case between an oil and gas lessee, Berenergy, and a coal lessee, Peabody Energy, and along with some minor subsidiaries of Peabody. The case involves federal oil and gas lease and a federal coal lease, various federal coal leases both issued by the Bureau of Land Management pursuant to the authority that was delegated by the Department of the Interior.
Can you take us through the timeline of this case? It began around 2014, right? And then it went to federal court and back. Can you lay that out a little bit more?
My understanding is that Peabody originally filed suit in federal court, and Berenergy originally filed suit in state court. That those cases were at one point consolidated in federal court. The federal court determined that the particular issue was not a federal question and therefore removed the case itself to the district court here in Wyoming.
That’s a big part of this conversation, right? Neither state or federal courts can decide who should be settling the case. Then it landed in the Wyoming Supreme Court -- who just released their opinion on the case. So, the basic conflict sounds like, is that these two companies were both issued leases to develop on the same land. That’s pretty common?
Correct, it's actually relatively common for overlapping leases in the Powder River Basin of Wyoming where you do have both accessible coal resources and quite a bit of oil and gas resources in multiple formations. I’d 99% of the time, there would be some sort of business deal reached amongst the parties that would keep the dispute out of the court system.
Okay, so both sides argued in the Wyoming Supreme Court that they have priority rights on their leases. What did the Supreme Court have to say in their opinion just released?
The Wyoming Supreme Court basically held that because those lease provisions granted authority to manage those federal minerals and administer the leases to the BLM, that basically the Wyoming Supreme Court found that all decision-making for the dispute rests in the Secretary of the Interior through the Bureau of Land Management. Because of that, the Wyoming Supreme Court found that the Bureau of Land Management is an indispensable party and so it basically said that if the BLM declines to join this lawsuit and neither parties can join BLM without BLM’s consent due to a doctrine called sovereign immunity that the case will have to be dismissed out of the Wyoming state court system. Basically, finding that the Wyoming state court has no authority to rule on what minerals can be produced and how the parties are to operate and therefore under its longtime precedent, the WY Supreme Court declined to issue what we call an advisory opinion.
So, the question became more about who should be making the decision, than how this should be settled it sounds like. So, the Wyoming Supreme Court is sending the case back down to a lower court now, so the BLM could theoretically get involved… What are your expectations as far as the federal agencies next actions?
Yeah, I tend to believe that the BLM is going to decline to intervene in the state court. The BLM’s not going to want to make itself a party to a Wyoming state court proceeding. But, I would speculate that both of the parties are going to go to the BLM and request that the BLM issue some sort of decision onto the development of the oil and gas and coal under the current leases. I would tend to believe that the BLM would issue some sort of guidance now that the BLM knows that the Wyoming courts are not going to get involved and the federal courts said it’s not a federal question... If the BLM acts or even it fails to acts [sic], I do believe that there is a possible administrative route through the Interior Board of Land Appeals which would allow the parties to either force the BLM to take an action or to dispute the action that BLM takes.
So, it doesn’t sound like the Supreme Court has set any precedent passing this down to a lower court. But if the Bureau of Land Management steps in and makes a decision, could that ease things going forward for similar conflicts?
First, I would say I disagree that there's no precedent been set. The Wyoming Supreme Court has set a pretty strong precedent that says it doesn’t have any jurisdiction over federal leases. Now, certainly it didn’t set a precedent in interpreting the leases, but the Wyoming Supreme Court has set a pretty strong precedent as to the jurisdiction of the Wyoming Supreme Court. Second, you know, guidance from the BLM or any sort of rulemaking would certainly set precedent as to the expectations of future parties. Because if we get some sort of definitive statement from the BLM of how the BLM’s going to rule in disputes such as this, there will be more clarity amongst the parties of what to expect.
Do you think this case does stand out in your mind as important and significant?
For Wyoming, I do believe it’s an important case because as we have discussed earlier, greater than 60% of the minerals in the state of Wyoming are owned by the Federal Government, and so what the Wyoming Supreme Court has said is that on the large majority of acreage, the Wyoming Supreme Court doesn’t have jurisdiction to rule on any individual oil and gas or federal coal lease terms. So, it is important from the perspective of the state of Wyoming.