Sustainable Development and the Regulation of the Coal Bed Methane Industry in the United States

Article by: Allan Ingelson; Originally published in JNREL Vol. 20, No. 1

Abstract by: Derek Leslie, Staff Member

This article critiques the regulatory regime in place to facilitate Coal Bed Methane (CBM) development and production in the United States. Applying the principles underlying the concept of sustainable development, Professor Ingelson suggests that the regulations affecting CBM development are to a large degree a mixed bag and are far from being considered an example of regulation that would successfully promote sustainable development.

The article begins by considering both the theoretical underpinnings of sustainable development as well as the CBM regulatory process as it exists under the current framework. The President's Council on Sustainable Development (PCSD), established in 1993 by President Clinton, proposed ten draft sustainability goals that incorporated five widely recognized sustainability principles that provide the necessary metric for reviewing the CBM regulatory regime. These five baseline principles suggest that Sustainable Development 1) respects ecological integrity, 2) is based on an efficient use of natural, manufactured, and social capital, 3) promotes equity, 4) relies on participatory approaches, and 5) requires environmental stewardship by all levels of decision-makers.

The CBM regulatory system advances these principles to varying degrees. The system is only partially successful at respecting ecological integrity. Regulation advancing this principle includes the scheme's incorporation of the Endangered Species Act, an ecosystem management planning approach for federal lands, and environmental impact assessments under the National Environmental Protection Act (NEPA). However, due to constitutional constraints, much of the process is truncated with respect to development on private lands, where significant development is likely to occur. The principle of the efficient use of resources reveals a system that is to some points sustainable. However, it does not seem to provide for an efficient use of capital as neither full-cost accounting, a polluter pays principle, nor the precautionary approach have been fully incorporated. As to the promotion of equity, the regulatory scheme also fails. This sustainability principle suggests costs and benefits should be distributed equally among the current and future generations. However, the legal system now in place does not require CBM developers to compensate owners for "reasonable use" damage caused by CBM operations. Landowners may not receive compensation for loss of crops, soil damage, decreased land values, et cetera. Inter-generational equity is also challenged by the current regime, because of the nature of the development and current consumption of CBM, depriving future generations of this finite resource. The fourth sustainability principle of public participation is largely addressed by the framework in place. The environmental impact assessment process, as well as citizen lawsuit provisions, provides stakeholders with a reasonable opportunity to participate in the decision-making process. The fifth principle, stewardship, suggests the government must promote and advocate the idea of sustainability both to the public and industry. While the EPA's attempt to incorporate some sustainability concepts in the CBM regulatory framework represents to some degree this principle, the Bureau of Land Management, as well as the various state agencies, have shown no effort to provide leadership in pursuing sustainable CBM development.

Looking at these concepts in detail, Professor Ingelson concludes that the CBM regulatory system does not effectively promote CBM sustainability. While aspects of the system certainly aim towards the goal of CBM sustainability, other features of the regime clearly prioritize other policy goals such as economic growth and use of CBM as an energy resource.

Takings Jurisprudence as Three-Tiered Review

Article by: Mark W. Cordes, originally appeared in JNREL Vol. 20, No.1

Abstract by: John Hendricks, Staff Member

Takings jurisprudence has been for all practical purposes a complex and often confusing legal area. However, in analyzing takings jurisprudence, it is possible to draw comparisons to the traditional Supreme Court jurisprudence regarding equal protection. While this comparison is not exact, it does provide an overarching classification system for takings. Like equal protection analysis, takings jurisprudence can be roughly divided into three-tiers of scrutiny based on what type of taking has occurred.

The type of takings subject to the most stringent level of review is takings which involve the permanent physical invasion of property. This category of takings is analogous to the strict scrutiny applied to equal protection claims. The Court has adopted a near per se rule that physical invasions constitute a taking. Just as the Court has protected against suspect classifications, so has it been protective of physical invasions of property by the government, such government action is almost always unconstitutional.

The second level of review in takings jurisprudence involves situations regarding development extractions. Under the standards announced in Nollan v. California Coastal Commission, 483 U.S. 825 (1987), a court should look for a "rough proportionality" between the extraction and the use of the land. This approach can be compared to intermediate scrutiny, in that it is not invalid per se and the court will look at the reasons for the government action.

Finally, the third type of takings is takings based on a land use regulation's economic impact. These types of takings can best be compared to the deferential review or minimum rationality review applied in equal protection cases. While the comparison between takings based on a land use regulation's economic impact and deferential review may seem to conflict with the Court's analysis in Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1977), and Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1992), in an abstract sense, both types of review are similar. While takings based on a land use regulation's economic impact are subject to a factual inquiry, the government is still granted a level of deference that is similar to deferential review in equal protection cases. Ultimately, the comparisons between takings jurisprudence and equal protections cases provide an analytical framework for understanding the sometimes murky world of takings jurisprudence.

Crossroads: The Collision of Bankruptcy's Automatic Stay and Environmental Law’s Injunctive Relief

By: Adam M. Back , Former Staff Member; Note Published in JNREL Vol. 20, No.1

Abstract by: Addison Schreck, Staff Member

The goals and policies of environmental law and bankruptcy law are not concepts generally thought to be of much consequence to one another. However, when a polluting company approaches insolvency, the interaction between the two becomes significantly more apparent. The Bankruptcy Code's automatic stay, as well as its creditor priority provisions, 11 U.S.C. § 362 and 11 U.S.C. § 726 respectively, bring the conflict between the two fields into the limelight.

The automatic stay provisions act to suspend any government enforcement proceedings including environmental ones. This accompanied by the government's status as a low priority creditor under § 726 make the situation a unique one. In general, the policy behind the government's low priority is sound. It is the government's inherent duty to foster economic well-being. Therefore, it makes sense that they would allow their own coffers to go wanting so that private creditors can be paid. However, the public policy argument which is generally applicable is not as appropriate in this case.

Environmental incidents are by their nature worsened by the passage of time. Therefore, the impediments created by the provisions of the Bankruptcy Code oftentimes force governmental agencies to pursue injunctive actions to remedy the situation. Such actions can force the insolvent party even further into debt and also result in sub-sufficient cleanup efforts due to the entity's already depleted resources and lack of expertise. While an environmental exception has been proposed to the automatic stay provisions of the Bankruptcy Act, perhaps the most promising solution proposed is heightening the government's priority during the distribution of a bankrupt entity's assets.

Given the current volatile state of the economy, bankruptcy law promises to be an area that will see developments over the coming years. Whether and to what extent these changes will give deference to environmental concerns is as yet unknown, but it is clear that the current state of affairs does not appropriately address the competing interests at hand.

Drinkable Water is a Pollutant?: Northern Plains Resource Council v. Fidelity Exploration

By: Laura L. Mays, Former Staff Member; This Comment was originally published in JNREL Vol. 20 No. 1.

Abstract by: Andrew Leung, Staff Member

In deciding Northern Plains Resource Council v. Fidelity Exploration, 325 F.3d 1155 (9th Cir. 2003), the Ninth Circuit held that naturally occurring groundwater in an unaltered state is a pollutant under the Clean Water Act (CWA) and should be treated accordingly. "Drinkable Water is a Pollutant?: Northern Plains Resource Council v. Fidelity Exploration" examines the court's analysis and explains the probably harmful effects that this holding will have on the coal industry in the Commonwealth of Kentucky and the country at large.

The "pollutant" in question is groundwater removed from natural aquifers through the harvesting of Coal-Bed Methane (CBM). CBM is a naturally occurring deposit of methane that exists in situations where coal is saturated with groundwater, thus trapping methane inside the coal. When CBM deposits are tapped, the miners must also remove the groundwater deposits in order to achieve the ideal pressurization at the mining site.

In Fidelity Exploration, Fidelity Exploration and Development Company extracted CBM from the Powder River Basin in Montana for commercial sale. The groundwater that was brought to the surface was transported to and deposited in the nearby Tongue River. It should be noted that the dissolved solids level in the groundwater was nearly triple that of the river. When this fact was publicized, The Northern Plain Resource Council (NPRC) filed citizen suit in the District Court for the District of Montana. The district court granted summary judgment for Fidelity, but NPRC timely appealed to the Ninth Circuit.

The Clean Water Act proscribes that transport and discharge of a pollutant from a "point source" into "navigable waters" is unlawful. In the case at hand, the "point source" is the underground aquifer from which the CBM was harvested, and the "navigable wate[r]" is the Tongue River. Although defendant Fidelity noted that the water was disposed of in its natural state, the Ninth Circuit found that CBM water was "industrial water" because it was produced as a byproduct of an industrial activity. Ironically, the court conceded that the same water was generally potable, and could be used for agricultural means.

This holding effectively dissuades coal companies from exploiting the CBM deposits that often accompany the coal deposits that they already mine. By imposing this obstacle, coal companies are not likely to change their practice of allowing CBM to escape into the atmosphere, where it contributes to global warming. Fidelity Exploration serves as one of those rare instances where a strict protectionist approach to the environment via literal interpretation of statutes may actually serve to cause greater harm than good.

CRUDE EVALUATIONS: DO COURTS PROPERLY CONSIDER THE COSTS OF FOREIGN ENERGY RELIANCE?

By: LeeAnne Edmonds Applegate, Former Staff Member. This Comment was originally published in JNREL Vol. 20 No. 1.

Abstract by: Ramsey Groves, Staff Member

Montana Wilderness Ass'n. v. Fry, 310 F. Supp. 2d 1127 (D. Mont. 2004) was decided by the United States District Court for the District of Montana. In this crucial case, the court enjoined the continued use of a natural gas pipeline based on violations of the National Environmental Policy Act of 1969 (NEPA). In issuing the injunction, the court weighed the public interest in protecting the environment against the potential economic harm to the energy company. However, the court failed to consider the economic harm to the public. Arguably, the court erred because the policies and goals of NEPA indicate the relevance of economic harm to the public. On multiple occasions, the courts of the Ninth Circuit have exhibited faulty analysis of energy issues by refusing to consider the economic harm to the public despite the requirements of the NEPA.

The NEPA states that its goals include "identify[ing] and developing methods and procedures . . . which will insure that presently unquantified environmental amenities and values may be given appropriate consideration in decision-making along with economic and technical considerations." Thus, the NEPA states in no uncertain terms that economic impact should be considered. However, in Montana Wilderness Ass'n v. Fry, the Ninth Circuit recognized that the remedy for a NEPA violation is ordinarily an injunction, and the court stated that the factors to be considered include harm to the public and harm to the parties. The court further stated, "A third party's financial damages from an injunction generally do not outweigh potential harm to the environment." Based on this statement, the Ninth Circuit clearly places more weight on the environmental impact factor.

When balancing factors that include harm to the public, it is reasonable to expect a court to give appropriate consideration to economic harm to the public. This is certainly true when one considers the rising price of oil. This is of great importance because of the widespread use of petroleum products in our culture and the profound effect of these products on our national economy. Rising oil prices not only increase transportation and heating costs, but they also impact the costs of household items made from petroleum derivatives, such as diapers, deodorant, aspirin, dentures, golf balls, and compact discs.

Fortunately, not all circuits have the same view as the Ninth Circuit. The D.C. Circuit recognizes the value in reducing U.S. dependency on foreign oil. As such, the D.C. Circuit takes a more expansive approach by considering all of the factors articulated by Congress, including the economic harm to the public.

The Ninth Circuit clearly fails to comply with the NEPA policy of weighing economic harms. This circuit is the largest in the country geographically and includes within its jurisdiction the oil-producing states of California and Alaska. The Ninth Circuit's view is particularly troubling because, by failing to consider the impact of increased energy costs on the public, there is certainly a potential for great damage to the economy. Absent a Supreme Court decision mandating that the standards of NEPA are to be considered in their entirety, the Ninth Circuit is likely to maintain its problematic position.

The Battle Between Coal and Gas Rights Continues: Hazard Coal Corp. v. Kentucky West Virginia Gas Co.

This comment was written by former staff member Elizabeth Clevinger and published in JNREL Vol. 20. No. 1. Staff member Tanner James wrote the following abstract.

Coal and natural gas, despite the ongoing debates about their conservation, are undeniably important to modern society's history and future. Landowners of resource-rich property often grant rights of access to those entities that facilitate the extraction and use of these natural fuels. But, on occasion, conflict arises; and, courts must effectively determine the importance of each resource involved.

In Hazard Coal Corp. v. Kentucky West Virginia Gas Co., 311 F.3d 733 (6th Cir. 2002), a property dispute between a coal company and natural gas company resulted in a victory for natural gas—potentially signifying the end of an era of coal dominance. Hazard Coal Corporation owned the mineral property rights of the tract of land in question. Kentucky West Virginia Gas Company held limited rights to run pipelines through the property that would allow access and transportation of their natural gas. After years of conflict-free operation, the plaintiff sought to extract coal from the property in a location that required the natural gas pipelines to be destroyed or relocated at the expense of Kentucky West. When Kentucky West declined, this case came to trial.

Despite finding that the property agreement was violated by Kentucky West, the Court considered equity and policy, finding for the defendant. The equitable notion of acquiescence (e.g., the plaintiff knew or should have known that the defendant was violating the agreement, yet allowed the violation to continue without complaint) prevented the plaintiff from succeeding on claim of breach. Perhaps more importantly, however, is that the Court considered social policy in determining that Kentucky West should not face liability for decisions made by Hazard Coal.

There once was a time when coal was king, and courts used policy considerations to protect the interests of coal companies. If Hazard Coal Corp. v. Kentucky West Virginia Gas Co. is any indication, the pendulum is now swinging away from coal, in favor of other viable fuel resources.