Eighth Circuit Affirms Approval of Drilling Petitions in North Dakota

Originally published in the July 2024 issue of Bench & Bar of Minnesota Environmental Law Update, Minnesota State Bar Association.

The Eighth Circuit Court of Appeals recently affirmed a district court’s grant of summary judgment on behalf of the Bureau of Land Management (BLM) and Slawson Exploration Company (Slawson) related to the issuance of drilling permits. See Mandan, Hidatsa & Arikara Nation v. U.S. Department of the Interior, 95 F.4th 573 (8th Cir. 2024). The Mandan, Hidatsa and Arikara Nation (MHA) brought suit against BLM, challenging its approval of Slawson’s eight petitions to drill and extract oil and natural gas beneath Lake Sakakawea located on the Fort Berthold Indian Reservation. The Eighth Circuit found BLM did not act arbitrarily or capriciously in approving the petitions, and its decision was based on rational evidence within the administrative record.

Critical to understanding the Eighth Circuit’s decision is an examination of the circumstances giving rise to litigation. Lake Sakakawea is the third largest reservoir in the United States, and the sole source of drinking water for MHA. Beneath the lake is the Bakken, one of the most valuable oil reserves in the world. Oil production on the reservation accounts for approximately one-sixth of North Dakota’s oil production. In 2011, Slawson submitted eleven applications to construct a well to extract oil and natural gas from beneath the lake. The proposed drill sites would be set back 300 feet from the lake. A six-year process, input from nearly 100 agencies and stakeholder groups, and a 425-page environmental assessment (EA) resulted in the BLM issuing a finding of no significant impact for Slawson’s drilling project and approving the petitions.

MHA then subsequently passed a resolution that required all drilling operations be set back from the lake no less than 1000 feet. One month later, BLM approved Slawson’s applications. MHA appealed that approval, and BLM affirmed the decision. MHA then brought suit against BLM under two theories: first, that BLM’s approval of Slawson’s petitions was arbitrary and capricious when it precluded MHA from further developing the record regarding health concerns; and second, BLM’s approval based on an insufficient record. MHA also contended that additional evidence could establish tribal jurisdiction over the drilling project. Slawson intervened, and the district court granted BLM’s and Slawson’s motions for summary judgment. MHA appealed to the Eighth Circuit.

The Eighth Circuit rejected MHA’s argument that it could assert tribal jurisdiction over the project. The court found that tribal jurisdiction was not a relevant factor to the approval of Slawson’s application, noting that “MHA’s jurisdiction over Slawson’s Project is an open question, which is not before this court because it was not a relevant factor to the Project’s approval.” Rather, for BLM’s approval to be arbitrary and capricious, BLM must have failed to rely on relevant factors or made a decision unsupported by rational basis. No such determination was present. The court determined that BLM evaluated all relevant factors, and that MHA’s setback law was not a relevant consideration. As the court explained, “The applicability of MHA’s setback law was not an original reason for approving the applications because the setback law was not a relevant factor to the approval. This court declines to adopt the novel position that an agency must explain not evaluating a non-relevant factor, which is a rational decision.” In addition, the court determined that BLM considered relevant factors in accordance with Congress’ Mineral Leasing Act of 1920.

The court further explained that compliance with applicable laws and regulations — in this case the MHA setback — is the obligation of the permit holder. BLM was acting within its sphere of expertise in approving drilling applications and need not take local regulations into account.

Finally, the Eighth Circuit determined that the EA sufficiently discussed the lake as MHA’s sole source of drinking water and identified no adverse impacts to the lake due to Slawson’s mitigation efforts. The court concluded “BLM’s approval of the Project based on the record was not arbitrary or capricious because it met the statutory and regulatory requirements — reasoned decision-making.”