Protest of December 12, 2017 Competitive Oil and Gas Lease Sale

Transcription

1 October 16, 2017 Via Fax Jon Raby Acting State Director U.S Bureau of Land Management Montana-Dakotas State Office 5001 Southgate Drive Billings MT, Fax: (406) Re: Protest of December 12, 2017 Competitive Oil and Gas Lease Sale Dear Mr. Raby: Pursuant to 43 C.F.R , WildEarth Guardians and the Montana Environmental Information Center ( MEIC ) hereby protest the Bureau of Land Management s ( BLM s ) proposal to offer 204 publicly-owned oil and gas lease parcels covering approximately 99, acres of land for competitive sale on December 12, The parcels are located in the Miles City Field Office in Big Horn, Carter, Custer, Fallon, Garfield, Powder River, and Richland Counties, Montana. The lease parcels for sale, as identified by the BLM s in its Final December 2017 Oil and Gas Sale List, 1 include the following: Lease Serial Number Acres Field Office County MTM C Miles City Garfield MTM C Miles City Garfield MTM DB Miles City Garfield MTM C Miles City Garfield MTM DC Miles City Garfield 1 This list of lease parcels is available on the BLM s website at:

2 MTM M Miles City Big Horn MTM M Miles City Big Horn MTM NC Miles City Big Horn MTM M Miles City Big Horn MTM MU Miles City Big Horn MTM MP Miles City Big Horn MTM MV Miles City Big Horn MTM M Miles City Big Horn MTM ND Miles City Big Horn MTM NE Miles City Big Horn MTM NL Miles City Big Horn MTM NM Miles City Big Horn MTM NF Miles City Big Horn MTM NA Miles City Big Horn MTM MW Miles City Big Horn MTM MR Miles City Big Horn MTM MQ Miles City Big Horn MTM NB Miles City Big Horn MTM NG Miles City Big Horn MTM NP Miles City Big Horn MTM NH Miles City Big Horn MTM N Miles City Big Horn MTM N Miles City Big Horn MTM N Miles City Big Horn MTM PC Miles City Big Horn MTM PD Miles City Big Horn MTM PE Miles City Big Horn MTM PF Miles City Big Horn MTM PJ Miles City Big Horn MTM MM Miles City Big Horn MTM LV Miles City Big Horn MTM LW Miles City Big Horn MTM MD Miles City Big Horn MTM LQ Miles City Big Horn MTM LR Miles City Big Horn MTM LT Miles City Big Horn MTM MF Miles City Big Horn MTM QG Miles City Rosebud MTM NV Miles City Big Horn 2

3 MTM NW Miles City Big Horn MTM N Miles City Big Horn MTM RA Miles City Custer MTM RC Miles City Custer MTM RF Miles City Custer MTM RJ Miles City Custer MTM RK Miles City Custer MTM RL Miles City Custer MTM RN Miles City Custer MTM RP Miles City Custer MTM R Miles City Custer MTM TD Miles City Custer MTM TH Miles City Custer MTM TJ Miles City Custer MTM TP Miles City Custer MTM TW Miles City Custer MTM T Miles City Custer MTM RB Miles City Custer MTM RQ Miles City Custer MTM RT Miles City Custer MTM RU Miles City Custer MTM T Miles City Custer MTM T Miles City Custer MTM UA Miles City Custer MTM UQ Miles City Custer MTM LM Miles City Powder River MTM LN Miles City Powder River MTM U Miles City Custer MTM VA Miles City Custer MTM VC Miles City Custer MTM VD Miles City Custer MTM VL Miles City Custer MTM W Miles City Custer MTM VT Miles City Custer MTM VU Miles City Custer MTM VV Miles City Custer MTM VW Miles City Custer MTM VX Miles City Custer MTM V Miles City Custer 3

4 MTM V Miles City Custer MTM V Miles City Custer MTM WA Miles City Custer MTM WB Miles City Custer MTM WC Miles City Custer MTM WD Miles City Custer MTM WE Miles City Custer MTM WG Miles City Custer MTM WH Miles City Custer MTM WJ Miles City Custer MTM WP Miles City Custer MTM WQ Miles City Custer MTM X Miles City Custer MTM WY Miles City Custer MTM W Miles City Custer MTM XA Miles City Custer MTM XB Miles City Custer MTM XL Miles City Custer MTM HC Miles City Powder River MTM HD Miles City Powder River MTM HE Miles City Powder River MTM J Miles City Powder River MTM CW Miles City Powder River MTM X Miles City Custer MTM X Miles City Custer MTM YD Miles City Custer MTM X Miles City Custer MTM Y Miles City Custer MTM Miles City Custer MTM Miles City Custer MTM YE Miles City Custer MTM YF Miles City Custer MTM YH Miles City Custer MTM YM Miles City Custer MTM YL Miles City Custer MTM YQ Miles City Custer MTM YT Miles City Custer MTM YU Miles City Custer MTM YV Miles City Custer 4

5 MTM YX Miles City Custer MTM YY Miles City Custer MTM Y Miles City Custer MTM Y Miles City Custer MTM Y Miles City Custer MTM Y Miles City Custer MTM QK Miles City Powder River MTM QL Miles City Powder River MTM QM Miles City Powder River MTM HK Miles City Powder River MTM HL Miles City Powder River MTM HM Miles City Powder River MTM A Miles City Custer MTM B Miles City Custer MTM C Miles City Custer MTM J Miles City Custer MTM Q Miles City Custer MTM R Miles City Custer MTM T Miles City Custer MTM U Miles City Custer MTM V Miles City Custer MTM W Miles City Custer MTM X Miles City Custer MTM Y Miles City Custer MTM Miles City Custer MTM G Miles City Custer MTM J Miles City Custer MTM M Miles City Custer MTM N Miles City Custer MTM P Miles City Custer MTM Q Miles City Custer MTM R Miles City Custer MTM G Miles City Custer MTM J Miles City Powder River MTM QP Miles City Powder River MTM QQ Miles City Powder River MTM QU Miles City Powder River MTM QV Miles City Powder River MTM QW Miles City Powder River 5

6 MTM K Miles City Custer MTM N Miles City Custer MTM R Miles City Custer MTM Miles City Custer MTM B Miles City Custer MTM C Miles City Custer MTM T Miles City Custer MTM Y Miles City Custer MTM Miles City Custer MTM A Miles City Carter MTM E Miles City Carter MTM J Miles City Carter MTM Miles City Carter MTM V Miles City Fallon MTM X Miles City Fallon MTM AC Miles City Fallon MTM AD Miles City Fallon MTM AE Miles City Fallon MTM AM Miles City Fallon MTM AN Miles City Fallon MTM AR Miles City Fallon MTM AT Miles City Fallon MTM AU Miles City Fallon MTM A Miles City Carter MTM BE Miles City Carter MTM BV Miles City Carter MTM A Miles City Fallon MTM BJ Miles City Fallon MTM BL Miles City Fallon MTM B Miles City Fallon MTM B Miles City Fallon MTM B Miles City Fallon MTM CC Miles City Fallon MTM CD Miles City Fallon MTM CF Miles City Fallon MTM CK Miles City Fallon MTM KR Miles City Fallon MTM KT Miles City Fallon MTM KU Miles City Fallon 6

7 MTM EP Miles City Fallon MTM FE Miles City Fallon MTM CV Miles City Richland MTM GG Miles City Fallon In support of its proposed leasing, the agency prepared an Environmental Assessment ( EA ), DOI-BLM-MT-C EA. As will be explained below, the BLM s EA and proposal to lease fall short of ensuring compliance with the National Environmental Policy Act ( NEPA ), 42 U.S.C h. The agency s EA is therefore deficient and fails to provide sufficient justification for the proposed action and the decision to issue a FONSI. Thus, we request the BLM refrain from offering the 204 proposed lease parcels for sale and issuance, unless and until the BLM corrects these deficiencies. STATEMENTS OF INTEREST WildEarth Guardians is a nonprofit environmental advocacy organization dedicated to protecting the wildlife, wild places, wild rivers, and health of the American West. On behalf of our members, Guardians has an interest in ensuring the BLM fully protects public lands and resources as it conveys the right for the oil and gas industry to develop publicly-owned minerals. More specifically, Guardians has an interest in ensuring the BLM meaningfully and genuinely takes into account the air, water, and climate implications of its oil and gas leasing decisions and objectively and robustly weighs the costs and benefits of authorizing the release of more greenhouse gas emissions that are known to contribute to global warming. WildEarth Guardians has submitted extensive comments on oil and gas lease sales in Montana, including this lease sale. 2 WildEarth Guardians has also consistently and extensively protested the Montana BLM s proposed oil and gas leasing over the years, including raising concerns over the agency s failure to adequately address climate impacts. 3 The mailing address for WildEarth Guardians to which correspondence regarding this protest should be directed is as follows: WildEarth Guardians 2590 Walnut St. Denver, CO Montana Environmental Information Center ( MEIC ) is a nonprofit organization founded in 1973 with approximately 5,000 members and supporters throughout the United States and the State of Montana. MEIC is dedicated to the preservation and enhancement of the natural resources and natural environment of Montana and to the gathering and disseminating of 2 For the purposes of this protest, Guardians hereby incorporates by reference its August 10, 2017 comments and exhibits submitted in response to BLM s draft EA for the December 2017 lease sale. 3 For example, Guardians protested the June 2017 oil and gas lease sale: 14_WG_Montana_June_2017_Oil_and_Gas_Lease_Protest.pdf?docID=

8 information concerning the protection and preservation of the human environment through education of its members and the general public concerning their rights and obligations under local, state, and federal environmental protection laws and regulations. MEIC is also dedicated to assuring that federal officials comply with and fully uphold the laws of the United States that are designed to protect the environment from pollution. MEIC and its members have intensive, longstanding recreational, aesthetic, scientific, professional, and spiritual interests in the responsible production and use of energy, the reduction of GHG pollution as a means to ameliorate our climate crisis, and the land, air, water, and communities impacted by fossil fuel development. MEIC members live, work, and recreate in areas affected by this lease sale. MEIC protests this action on its own behalf and on behalf of its members. The mailing address for MEIC to which correspondence regarding this protest should be directed is as follows: MEIC P.O. Box 1184 Helena, MT STATEMENT OF REASONS WildEarth Guardians and MEIC protest the BLM s December 12, 2017 oil and gas lease sale because the agency, through the EA, 1) fails to fully analyze the impacts of hydraulic fracturing and horizontal drilling that will result from developing the lease parcels in Big Horn County, 2) fails to accurately apply the reasonably foreseeable development scenario to the lease parcels, 3) fails to adequately tier to the underlying Resource Management Plan ( RMP ) or a conduct site-specific analysis when needed, 4) fails to analyze the cumulative impacts of reasonably foreseeable greenhouse gas emissions, and 5) fails to consider the social cost of releasing more carbon into the atmosphere, contrary to the requirements of NEPA, and its regulations promulgated thereunder by the White House Council on Environmental Quality ( CEQ ), 40 C.F.R I. Legal Requirements of NEPA NEPA is our basic national charter for protection of the environment. 40 C.F.R (a). The law requires federal agencies to fully consider the environmental implications of their actions, taking into account high quality information, accurate scientific analysis, expert agency comments, and public scrutiny, prior to making decisions. Id. at (b). This consideration is meant to foster excellent action, resulting in decisions that are well informed and that protect, restore, and enhance the environment. Id. at (c). To fulfill the goals of NEPA, federal agencies are required to analyze the effects, or impacts, of their actions to the human environment prior to undertaking their actions. 40 C.F.R (d). To this end, the agency must analyze the direct, indirect, and cumulative effects of its actions, and assess their significance. Id (a), (b), and (d). Direct effects include all impacts that are caused by the action and occur at the same time and place. Id. 8

9 1508.8(a). Indirect effects are caused by the action and are later in time or farther removed in distance, but are still reasonably foreseeable. Id. at (b). Cumulative effects include the impacts of all past, present, and reasonably foreseeable actions, regardless of what entity or entities undertake the actions. Id Federal agencies are required to integrate the NEPA process with other planning at the earliest possible time... to head off potential conflicts. Id. at An agency may prepare an environmental assessment ( EA ) to analyze the effects of its actions and assess the significance of impacts. See id ; see also 43 C.F.R Where effects are significant, an agency must prepare an Environmental Impact Statement ( EIS ). See 40 C.F.R Where significant impacts are not significant, an agency may issue a Finding of No Significant Impact ( FONSI ) and implement its action. See id ; see also 43 C.F.R (2). Within an EA or EIS, the scope of the analysis must include [c]umulative actions and [s]imilar actions. 40 C.F.R (a)(2) and (3). Cumulative actions include action that, when viewed with other proposed actions have cumulatively significant impacts and should therefore be discussed in the same impact statement. Id (a)(2). Similar actions include actions that, when viewed with other reasonably foreseeable or proposed agency actions, have similarities that provide a basis for evaluating their environmental consequences together. Id (a)(3). Key indicators of similarities between actions include common timing or geography. Id. A. The BLM Fails to Analyze the Impacts of Horizontal Drilling and Hydraulic Fracturing for the Wells in Big Horn County. The underlying Miles City Field Office RMP and accompanying Final EIS, issued in 2015, relies on a reasonably foreseeable development scenario ( RFD ) to quantify the impacts from oil and gas development. The RFD categorizes Big Horn County as an area with medium development potential. See EA, App x C, at 259. However, the BLM has recently approved three Application Permits to Drill ( APDs ) in Big Horn County, all of which have used or will use hydraulic fracturing and horizontal drilling to reach a shale formation at 12,000+ feet. See Exhibit 1, Comment Letter from WildEarth Guardians re: APDs for Shale Oil in Big Horn County and Other Adjacent Areas (Oct. 6, 2017). Although the current RMP does anticipate some drilling activity in Big Horn County, it does not analyze federal oil shale development that may occur. See Miles City FO RMP at ( Federal oil shale leasing would not likely occur in either the short or the long-term because economically mineable deposits of oil shale are not known to exist within the planning area. ). Thus, the BLM must analyze the increased on-theground impacts from developing any parcels in Big Horn County and adjacent areas which may contain this formation. Because of fracking and horizontal drilling, shale plays once thought to be uneconomical, are now being drilled. With this increase in development comes increased impacts to air, climate, water, and land. For example, according to the EPA, between 2002 and 2006, oil and gas [p]roduction emissions [for VOCs, NOx, CO, SO 2, and PM 10 ] in Montana increased by almost 9

10 75 percent, and this trend is likely to continue. See EPA Region 8, An Assessment of the Environmental Implications of Oil and Gas Production: A Regional Case Study at 3-6 (2008), In Big Horn County, the BLM has approved three fracking wells as of 2017, and based on expressions of interest in the area, more wells are likely to come. Thus, development in this area is likely to be greater that what the RMP estimates, and the BLM must analyze these increased impacts from fracking and horizontal drilling at a minimum at the leasing stage. Indeed, the RMP estimated that only 36 oil wells would be drilled in Big Horn County between 2011 and See Miles City FO RMP, Mineral App x at MIN-91, available at The BLM cannot ignore the increased impacts that will result from new development in this area by relying on the outdated analysis in the RMP. The BLM must either analyze these impacts in the EA for the December lease sale or amend the RMP to account for these changes. B. The BLM s Reasonably Foreseeable Development Scenario is Not Accurate. While we appreciate BLM attempts to disclose the reasonably foreseeable direct and indirect greenhouse gas emissions resulting from development of the proposed leases, see EA at 48 50, the agency s reasonably foreseeable development numbers appear grossly underestimated and completely unrealistic, and the BLM fails to correct this issue in its final EA. The BLM estimates that out of 204 parcels, only 25 wells will be developed. See EA at 48, (Appendix C). BLM s assessment of reasonably foreseeable oil and gas wells is based on an overly simplistic calculation of the percentage of lease acreage within the total acreage of a potential area. This is a bizarre method for assessing reasonably foreseeable wells, and we have yet to see this method applied in any other BLM State or Field Office. Given that the point of leasing is to accommodate industry demands to develop oil and gas wells, it is astonishing that the BLM would project such a small amount of development resulting from the proposed leases. This raises serious questions over whether the BLM should actually be offering most of the lease parcels for sale in the first place. In addition, BLM s estimates of reasonably foreseeable development are contradictory to the way BLM has estimated reasonably foreseeable development in other leasing scenarios. Recently in Utah, the BLM presumed that, at a minimum, one well would be developed on every lease parcel offered for sale. See Vernal Field Office, December 2017 Competitive Oil and Gas Lease Sale Final Environmental Assessment, App x D (Sept. 1, 2017), The Vernal FO also considered whether the parcel in question was within 2 miles of a well which had produced oil or gas within the past 6 years. Id. This approach is more logical because development does not occur uniformly across a certain area, as the BLM is well aware. In sum, given that the BLM s assessment of reasonably foreseeable direct and indirect greenhouse gas emissions is based on this inadequate reasonably foreseeable development analysis, the EA is insufficient and fails to demonstrate that a FONSI is appropriate. 10

11 C. The BLM Fails to Comply with NEPA s Tiering Requirements and Requirements for Site-Specific Analysis. According to the Council on Environmental Quality s NEPA regulations, Whenever a broad environmental impact statement has been prepared... and a subsequent statement or environmental assessment is then prepared on an action included within the entire program or policy (such as a site specific action) the subsequent statement or environmental assessment need only summarize the issues discussed in the broader statement and incorporate discussions from the broader statement by reference and shall concentrate on the issues specific to the subsequent action. 40 C.F.R Here, although the BLM generally does a good job of summarizing the broader FEIS from the RMP and then discussing the site-specific impacts from the lease sale, the BLM s discussion of the cumulative impacts from Alternative B (the proposed alternative) fails to meet the required standard set out in 40 C.F.R See EA at 59. The BLM must first summarize the issues addressed in the broader NEPA document and then concentrate on the issues specific to the subsequent action. Id. The BLM s discussion in the EA does not summarize the cumulative impacts from the FEIS and does not address any issues specific to the proposal to lease 204 parcels for oil and gas development. Instead, the EA incorporates the EIS by reference in a short, three-sentence paragraph and defers any analysis of the cumulative impacts to the APD stages. This section is wholly lacking in any substantive analysis. The BLM s failure to incorporate any meaningful discussion of the cumulative impacts of the proposal to lease is a clear violation of the requirements and spirit of NEPA. The BLM responds to this argument by noting that CEQ guidance directs agencies to eliminate repetitive discussions of the same issues. 40 C.F.R But, the CEQ regulations do not require that federal agencies eliminate repetitive discussions at the expense taking a hard look at the project level. See High Country Conservation Advocates v. U.S. Forest Service, 52 F.Supp. 3d 1174 (D. Colo. 2014) ( The EA, while typically a more concise analysis than an EIS, must still evaluate the need for the proposal, alternatives as required by NEPA section 102(2)(E), and the environmental impacts of the proposed action and alternatives. ). Indeed, NEPA requires that a cumulative impacts analysis include a sufficiently detailed catalogue of past, present, and future projects, and provide adequate analysis about how these projects, and differences between the project, are thought to have impacted the environment. Lands Council v. Powell, 395 F.3d 1019, 1028 (9th Cir. 2005). As shown by the section below, numerous lease sales are occurring across the West, including multiple sales in Montana each year. The BLM must look at the cumulative impacts specific to the project instead of relying on the broad, programmatic analysis in the RMP. Furthermore, to the extent that the BLM relies on a NEPA analysis at the Application Permit to Drill ( APD ) stage, this approach is also flawed. First, NEPA is not designed to postpone analysis of an environmental consequence to the last possible moment. U.S. Bureau of 11

12 Land Management v. Kern, 284 F.3d 1062, 1072 (9th Cir. 2002). This is especially the case if postponing analysis results in a piecemeal look at the impacts. Second, because leasing conveys a right to develop, absent any stipulations that provide the agency with authority to constrain and even prevent future development to limit greenhouse gas or climate impacts, the BLM has no basis to assert that it is appropriate to wait to conduct its legally required analysis under NEPA, or worse, assert that there would be no reasonably foreseeable emissions associated with its proposed action. Clearly, BLM s short reference to RMP to fulfill its responsibility to analyze cumulative impacts at the leasing stage is completely inadequate under NEPA. On top of this, the Montana BLM has approved APDs via categorical exclusions in the past. For example, the Miles City Field Office approved a permit to drill a horizontal well on the Fort Peck Indian Reservation on September, 23, 2016 through a categorical exclusion. Exhibit 2, BLM, Categorical Exclusion for the Fort Worth Operating Company LLC Permit to Drill the Clark Farms #29-10 (Sept 26, 2016), office/projects/nepa/67755/86866/104072/cx_fortworth Indian_ N_50E_APD.pdf. This means any commitment to address the greenhouse gas emissions of development of the proposed leases through subsequent NEPA is, at best, hollow, and at worst, a deliberate attempt to avoid accountability to addressing potentially significant environmental impacts under NEPA. D. The BLM Fails to Fully Analyze and Assess the Cumulative Impacts of Greenhouse Gas Emissions that Would Result from Issuing the Proposed Lease Parcels. Unfortunately, as mentioned above, the agency also completely fails to discuss the cumulative climate impacts from the similar actions occurring from BLM lease sales in the Rocky Mountain region as required by NEPA. NEPA requires an agency to analyze the impacts of similar and cumulative actions in the same NEPA document in order to adequately disclose impacts in an EIS or provide sufficient justification for a FONSI in an EA. See 40 C.F.R (a)(2) and (3). Here, the BLM s analysis is entirely devoid of any consideration of greenhouse gas emissions from oil and gas development within Montana, as well as throughout the Rocky Mountain West. See EA at 59. Additionally, a review of the underlying Final EIS prepared for the Miles City Field Office s Resource Management Plan, shows that the BLM completely omits an assessment of cumulative greenhouse gas emissions associated with oil and gas development. BLM, Miles City Field Office RMP: Chapter 4, Environmental Consequences 4-3 (Sept. 21, 2015), But, in 2017 alone, the BLM has leased or is planning to lease all of the parcels noted below. Montana, North Dakota, and South Dakota: In June the BLM sold 49 parcels (15, acres), see 17%20Comp%20Results.pdf. And in September, the BLM sold 15 parcels totaling 12

13 4,000 acres. %20Stats_Combined.pdf. Wyoming: In February of 2017, the BLM sold 278 parcels covering 183, acres in the High Plains and Wind River-Bighorn Basin District Offices. See In June, the BLM sold 26 parcels covering 31, acres in the High Desert District Office. See In September, BLM sold 127 parcels totaling 106,687 acres. See And this December, the agency is offering 45 parcels (72,843.75). See Colorado: On March 9, 2017, the BLM sold 17 parcels covering 16, acres. See On June 8, 2017, the BLM sold 70 parcels covering 63, acres in western Colorado. See In September, the BLM sold 3 parcels ( acres). In December, the BLM is also contemplating the sale of 28 parcels covering 27, acres in western Colorado. See ng_dec2017.pdf. All told, the BLM has leased or is proposing to lease approximately 658 parcels or 521, acres of publically-owned land in the states listed above in The need to take into account similar and cumulative actions is underscored by the fact that the BLM acknowledges that the proper geographic area for analyzing and assessing the impacts of greenhouse gas emissions is on a national scale. See EA at 47. Although this assessment was apparently prepared to try to mislead the public into believing that emissions from the proposed leasing are not significant ( this estimated quantity [of GHG emission] represents approximately % of total U.S GHG emissions reported in 2015, EA at 47), it actually emphasizes the need for the BLM to not simply account for emissions from the proposed leasing, but likely for all greenhouse gas emissions associated with BLM-approved oil and gas leasing nationwide. Indeed, the BLM cannot claim that emissions are insignificant in the context of state or national emissions, but then fail to disclose the direct, indirect, and cumulative greenhouse gases that would result from all other similar and cumulative actions within a statewide or national scope. The failure to do so renders the EA inadequate and fails to provide support for a FONSI. 13

14 In addition, in its response to Guardians comments on the draft EA, the BLM completely misses the point. See EA at 282. The agency discusses its analysis on downstream greenhouse gases from combustion to claim that it fulfilled its duty to analyze cumulative greenhouse gas emissions. Although Guardians appreciates that the BLM has estimated emissions from downstream combustion, this does not address BLM s duty to analyze the cumulative impacts of similar actions with common timing and geography. As a result, the EA remains inadequate to support the lease sale, and the BLM s FONSI cannot stand. E. The BLM Fails to Analyze the Costs of Reasonably Foreseeable Carbon Emissions Using Well-Accepted, Valid, Credible, GAO-Endorsed, Interagency Methods for Assessing Carbon Costs. In addition to a lack of cumulative impacts analysis, it is particularly disconcerting that the agency continues to dismiss the benefits of using the social cost of carbon protocol, a valid, well-accepted, credible, and interagency endorsed method of calculating the costs of greenhouse gas emissions and understanding the potential significance of such emissions, while simultaneously discussing the revenues generated by the lease sale bonus bids and rental rates once development occurs. See EA at The social cost of carbon protocol for assessing climate impacts is a method for estimat[ing] the economic damages associated with a small increase in carbon dioxide (CO2) emissions, conventionally one metric ton, in a given year [and] represents the value of damages avoided for a small emission reduction (i.e. the benefit of a CO2 reduction). Exhibit 1, to WildEarth Guardians August 10, 2017 Comments. The protocol was developed by a working group consisting of several federal agencies. In 2009, an Interagency Working Group was formed to develop the protocol and issued final estimates of carbon costs in See Exhibit 2, to WildEarth Guardians August 10, 2017 Comments. These estimates were then revised in 2013 by the Interagency Working Group, which at the time consisted of 13 agencies. See Exhibit 3, to WildEarth Guardians August 10, 2017 Comments. This report and the social cost of carbon estimates were again revised in See Exhibit 4, to WildEarth Guardians August 10, 2017 Comments. Again, this report and social cost of carbon estimates were revised in See Exhibit 5, to WildEarth Guardians August 10, 2017 Comments. Most recently, as an addendum to previous Technical Support Documents regarding the social cost of carbon, the Department of the Interior joined numerous other agencies in preparing estimates of the social cost of methane and other greenhouse gases. See Exhibit 6, to WildEarth Guardians August 10, 2017 Comments. Depending on the discount rate and the year during which the carbon emissions are produced, the Interagency Working Group estimates the cost of carbon emissions, and therefore the benefits of reducing carbon emissions, to range from $10 to $212 per metric ton of carbon dioxide. See chart below. In one of its more recent update to the Social Cost of Carbon Technical Support Document, the White House s central estimate was reported to be $36 per metric ton. Exhibit 7 at 4. Currently, however, the central estimate is reported to be $50 per 14

15 metric ton, a value that experts have found to be the best estimate of the social cost of greenhouse gases and that experts have urged government officials to consider in their analyses. See Exhibit 7, to WildEarth Guardians August 10, 2017 Comments. In July 2014, the U.S. Government Accountability Office ( GAO ) confirmed that the Interagency Working Group s estimates were based on sound procedures and methodology. See Exhibit 8, to WildEarth Guardians August 10, 2017 Comments. Year 5% Average 3% Average 2.5% Average High Impact (95 th Pct at 3%) Most recent social cost of carbon estimates presented by Interagency Working Group on Social Cost of Carbon. The 95th percentile value is meant to represent higher-thanexpected impacts from climate change. See Exhibit 6. Although often utilized in the context of agency rulemakings, the protocol has been recommended for use and has been used in project-level decisions. For instance, the EPA recommended that an EIS prepared by the U.S. Department of State for the proposed Keystone XL oil pipeline include an estimate of the social cost of carbon associated with potential increases of GHG emissions. Exhibit 9, to WildEarth Guardians August 10, 2017 Comments. More importantly, the BLM, including the neighboring Billings Field Office, has also utilized the social cost of carbon protocol in the context of oil and gas approvals. In other recent Environmental Assessments for oil and gas leasing in Montana, the Billings Field Office estimated the annual SCC [social cost of carbon] associated with potential development on lease sale parcels. Exhibit 10, to WildEarth Guardians August 10, 2017 Comments. In conducting its analysis, the BLM used a 3 percent average discount rate and year 2020 values, presuming social costs of carbon to be $46 per metric ton. Id. Based on its estimate of greenhouse gas emissions, the agency estimated total carbon costs to be $38,499 (in 2011 dollars). Id. In Idaho, the BLM also utilized the social cost of carbon protocol to analyze and assess the costs of oil and gas leasing. Using a 3% average discount rate and year 2020 values, the agency estimated the cost of carbon to be $51 per ton of annual CO 2 e increase. See Exhibit 11, to WildEarth Guardians August 10, 2017 Comments. Based on this estimate, the agency estimated that the total carbon cost of developing 25 wells on five lease parcels to be $3,689,442 annually. Id. at 83. To be certain, the social cost of carbon protocol presents a conservative estimate of economic damages associated with the environmental impacts climate change. As the EPA has 15

16 noted, the protocol does not currently include all important [climate change] damages. Exhibit 1 at 1. As explained: The models used to develop [social cost of carbon] estimates do not currently include all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature because of a lack of precise information on the nature of damages and because the science incorporated into these models naturally lags behind the most recent research. Id. In fact, more recent studies have reported significantly higher carbon costs. For instance, a report published this month found that current estimates for the social cost of carbon should be increased six times for a mid-range value of $220 per ton. See Exhibit 12, to WildEarth Guardians August 10, 2017 Comments. In spite of uncertainty and likely underestimation of carbon costs, nevertheless, the SCC is a useful measure to assess the benefits of CO2 reductions, and thus a useful measure to assess the costs of CO2 increases. Exhibit 1. That the economic impacts of climate change, as reflected by an assessment of social cost of carbon, should be a significant consideration in agency decision making, is emphasized by a recent White House report, which warned that delaying carbon reductions would yield significant economic costs. See Exhibit 13, to WildEarth Guardians August 10, 2017 Comments. As the report states: [D]elaying action to limit the effects of climate change is costly. Because CO 2 accumulates in the atmosphere, delaying action increases CO 2 concentrations. Thus, if a policy delay leads to higher ultimate CO 2 concentrations, that delay produces persistent economic damages that arise from higher temperatures and higher CO 2 concentrations. Alternatively, if a delayed policy still aims to hit a given climate target, such as limiting CO 2 concentration to given level, then that delay means that the policy, when implemented, must be more stringent and thus more costly in subsequent years. In either case, delay is costly. Id. at 1. The requirement to analyze the social cost of carbon is supported by the general requirements of NEPA and is specifically supported in federal case law. Courts have ordered agencies to assess the social cost of carbon pollution, even before a federal protocol for such analysis was adopted. In 2008, the U.S. Court of Appeals for the Ninth Circuit ordered the National Highway Traffic Safety Administration to include a monetized benefit for carbon emissions reductions in an Environmental Assessment prepared under NEPA. Center for Biological Diversity v. National Highway Traffic Safety Administration, 538 F.3d 1172, 1203 (9th Cir. 2008). The Highway Traffic Safety Administration had proposed a rule setting corporate average fuel economy standards for light trucks. A number of states and public interest groups challenged the rule for, among other things, failing to monetize the benefits that would accrue from a decision that led to lower carbon dioxide emissions. The Administration had monetized the employment and sales impacts of the proposed action. Id. at The agency argued, however, that valuing the costs of carbon emissions was too uncertain. Id. at The 16

17 court found this argument to be arbitrary and capricious. Id. The court noted that while estimates of the value of carbon emissions reductions occupied a wide range of values, the correct value was certainly not zero. Id. It further noted that other benefits, while also uncertain, were monetized by the agency. Id. at More recently, a federal court has done likewise for a federally-approved coal lease. There, the court began its analysis by recognizing that a monetary cost-benefit analysis is not universally required by NEPA. See High Country Conservation Advocates v. U.S. Forest Service, 52 F.Supp. 3d 1174 (D. Colo. 2014) (citing 40 C.F.R ). However, when an agency prepares a cost-benefit analysis, it cannot be misleading. Id. at 1182 (citations omitted). In that case, the NEPA analysis included a quantification of benefits of the project, but, the quantification of the social cost of carbon, although included in earlier analyses, was omitted in the final NEPA analysis. Id. at The agencies then relied on the stated benefits of the project to justify project approval. This, the court explained, was arbitrary and capricious. Id. Such approval was based on a NEPA analysis with misleading economic assumptions, an approach long disallowed by courts throughout the country. Id. Furthermore, the court reasoned that even if the agency had decided that the social cost of carbon was irrelevant, the agency must still provide justifiable reasons for not using (or assigning minimal weight to) the social cost of carbon protocol.... Id. at 1193 (emphasis added). In August, a federal district court in Montana cited to the High Country decision and reaffirmed its reasoning, rejecting a NEPA analysis for a coal mine expansion that touted the economic benefits of the expansion without assessing the carbon costs that would result from the development. See Mont. Envtl. Info. Ctr. v. U.S. Office of Surface Mining, No. CV M- DWM (D. Mont. Aug. 14, 2017). In its response to comments, the BLM goes out of its way to argue that its discussion of revenue from the lease sales is not an economic benefit because the agency does not call it that. This argument fails because it is circular and contrary to the High Country decision. First, the argument is circular because the BLM argues that nowhere in this EA does the BLM refer to the potential revenue associated with this lease sale as an economic benefit since that would be inaccurate since a cost-benefit analysis was not conducted. But, this is precisely Guardians point. The agency has not included a full cost-benefit analysis because it has only included the benefits. And, it does not matter whether the BLM labels its analysis an economic benefit analysis. If the agency includes a discussion of the revenue from development of oil and gas, this discussion cannot occur without disclosure of the other side of the coin the social costs from releasing more carbon into the atmosphere. Second, this conclusion is unscored by the court s conclusion in High Country. There, the court specifically ruled that when a final EIS weighed several specific economic benefits coal recovered, payroll, associated purchases of supplies and services, and royalties, without disclosing the social cost of carbon, the agency s analysis was arbitrary and capricious. High Country, 52 F.Supp. at 1190 (emphasis added). The BLM cannot avoid this decision by claiming that its extensive analysis of the bonus bids and rental revenue from the lease sales is not an economic benefit. A recent op-ed in the New York Times from Michael Greenstone, the former chief economist for the President s Council of Economic Advisers, confirms that it is appropriate and 17

18 acceptable to calculate the social cost of carbon when reviewing whether to approve fossil fuel extraction. See Exhibit 14, to WildEarth Guardians August 10, 2017 Comments. Just this year, the Proceedings of the National Academy of Sciences of the United States of America ( PNAS ), acknowledged in a peer-reviewed article from February of this year that the social cost of carbon analysis is [t]he most important single economic concept in the economics of climate change, and that federal regulations with estimated benefits of over $1 trillion have used the SCC. Exhibit 15, to WildEarth Guardians August 10, 2017 Comments. Clearly, the social cost of carbon provides a useful, valid, and meaningful tool for assessing the climate consequences of the proposed development, and the BLM s dismissal of the value of this protocol while simultaneously discussing the benefits of oil and gas development is arbitrary and capricious. While we do not suggest that a comprehensive costbenefit analysis is required, the fact that economic benefits are touted in the EA indicates that costs and benefits are useful for assessing the significance of the proposed development. To this end, the BLM must disclose carbon costs in order to fully assess the significance of climate impacts and support any FONSI. II. Conclusion In sum, WildEarth Guardians and MEIC request that the BLM withhold all of the parcels scheduled for the December 2017 lease sale until the agency completes its obligations under NEPA as discussed above. Sincerely, Rebecca Fischer Climate Guardian WildEarth Guardians 2590 Walnut St. Denver, CO (406) rfischer@wildearthguardians.org Derf Johnson Clean Water Program Director & Staff Attorney MEIC P.O. Box 1184 Helena, MT (406) djohnson@meic.org 18

19 Exhibit 1

20 October 6, 2017 Via electronic mail Todd Yeager, Field Manager U.S. Bureau of Land Management Montana-Dakotas State Office Miles City Field Office 111 Garryowen Road Miles City, MT Re: Comments on Any Current Application Permit to Drill Under Consideration by the BLM Authorizing Horizontal Drilling and Fracking of Shale in Big Horn County, Montana and Adjacent Areas Dear Mr. Yeager: WildEarth Guardians submits the following comments on any current application permits to drill ( APDs ) under consideration by the Miles City Field Office of the Bureau of Land Management ( BLM ) which authorize horizontal drilling and fracking of shale formations in Big Horn County, Montana and in adjacent areas. This comment letter is relevant because the BLM has issued three APDs for one existing oil well, and two proposed oil wells, in Big Horn County. After reviewing the National Environmental Policy Act ( NEPA ) analyses for the APDs, Guardians is very concerned about the extent of the BLM s analysis in light of the environmental impacts from this type of well. WildEarth Guardians is a nonprofit environmental advocacy organization dedicated to protecting the wildlife, wild places, wild rivers, and health of the American West. On behalf of our members, Guardians has an interest in ensuring the BLM fully protects public lands and resources as it conveys the right for the oil and gas industry to develop publicly-owned minerals. More specifically, Guardians has an interest in ensuring the BLM meaningfully and genuinely takes into account the air, water, and climate implications of its oil and gas permitting decisions, and robustly considers the costs of development on endangered and threatened species.

21 I. Background Information On November 16, 2016, the BLM Miles City Field Office issued a decision record approving Alta Vista Oil Corporation s APD for the Slaughterville 1H federal oil well. 1 The BLM relied upon an Environmental Assessment ( EA ), DOI-BLM-MT-C EA, and a Finding of No Significant Impact ( FONSI ) to issue to its decision. Concurrently, the EA for the Slaughterville well relies on the 2015 Miles City Field Office Resource Management Plan ( RMP ). See EA at 2. Alta Vista commenced drilling the Slaughterville 1H well on June 24, 2017 and completed the well on July 26, On September 7, 2017, the BLM issued a Determination of NEPA Adequacy ( DNA ) for two additional APDs for two wells, also owned by Alta Vista, and directly adjacent to the Slaughterville 1H well. 2 The DNA tiered to the Slaughterville EA. The BLM issued a decision record approving these wells on September 14 and 15, All of the aforementioned wells will use a combination of hydraulic fracturing, or fracking, and horizontal drilling. 3 See Slaughterville 1H EA at 5; Doc Holiday and Hickok DNA at 6. Because of this, Guardians has concerns about the BLM s current NEPA analyses and any future analyses that might occur for similar wells, as outlined below. II. The BLM s Must Amend the Miles City Field Office RMP to Meet Its Obligations Under NEPA and Address the Impacts of Unconventional Oil. First, it is very concerning to see the BLM rubberstamp Alta Vista s plans to frack and drill multiple wells in an area that currently has no shale oil development. Although Big Horn County has seen coal bed methane ( CBM ) wells in the past, shallow CBM wells have very different environmental impacts from shale wells which extend down 12,000+ feet below the surface. As a result of the different and intense nature 4 of these new wells, which use fracking combined with horizontal drilling, the BLM must do an in-depth, site-specific analysis for each of the three wells described above and any other wells that may occur. To date, the BLM has approved three oil wells that will drill into the Thermopolis Shale formation through the APDs discussed above. Unfortunately, the BLM s environmental analysis for these three wells is alarmingly incomplete. For the Slaughterville well, which Alta Vista 1 The NEPA and permitting documents for the Slaughterville 1H well are available on BLM s eplanning website at: 2 The NEPA and permitting documents for the Doc Holiday 1H and Hickock 1H wells are available on BLM s eplanning website at: 3 Interestingly, the Slaughterville EA does not mention whether the well would be fracked but does propose horizontal drilling. Because the formation is at a depth of 12,000+ feet and horizontal drilling is proposed, it is almost certain that fracking would occur. 4 See EPA Region 8, An Assessment of the Environmental Implications of Oil and Gas Production: A Regional Case Study at 1-3 (2008), 2

22 drilled in July, the BLM completed a 27-page EA that does not even mention hydraulic fracturing. But, based on the depth of the formation, fracking is almost certain to occur. The BLM s analysis is also tiered to the Miles City Field Office RMP from Although the Miles City Field Office RMP analyzed that some shale development would occur in Big Horn County, it estimated that only 36 oil wells would be drilled in Big Horn County from 2011 through See Miles City FO RMP, Mineral App x at MIN-91, available at If the three wells proposed by Alta Vista are productive, rapid shale oil development is sure to occur. Indeed, this boom may already be occurring as shown by the large number of leases proposed for the area for the December 2017 oil and gas lease sale. See BLM Oil & Gas Lease Sale: December 12, 2017, available at _Sale_December_2017.pdf. Based on this information, the BLM must complete a more in-depth analysis to account for these additional impacts. The NEPA analyses for the two proposed wells are similarly incomplete because the DNA for these wells is tiered to the EA for the Slaughterville well, and does not provide any additional environmental analysis. Thus, before moving forward with any of the three Alta Vista wells and any other related wells, the BLM must amend or revise the Miles City Field Office RMP in order to account for the increased impacts that will result from the new, intense shale development. III. The BLM s NEPA Analysis Fails to Fully Analyze Climate Impacts Shale development also has increased implications for the climate. See EPA Region 8, An Assessment of the Environmental Implications of Oil and Gas Production: A Regional Case Study at 3-6 (2008), see also, Robert Howorth, Methane Emissions and Climatic Warming Risk from Hydraulic Fracturing and Shale Gas Development: Implications For Policy (2015), The BLM fails to acknowledge the direct, indirect, or cumulative climate impacts from the new wells in its EA for the Slaughterville well or otherwise calculate site-specific greenhouse gas emissions. Furthermore, the EA and the Miles City Field Office RMP leaves out any mention of the social cost of carbon protocol, while simultaneously analyzing the economic benefits of oil and gas extraction. See Miles City FO RMP, Chapter 4 at Courts have required agencies to analyze the social cost of carbon when an agency includes an economic benefit section. See High Country Conservation Advocates v. U.S. Forest Service, 52 F.Supp. 3d 1174, 1196 (D. Colo. 2014). But, the BLM fails to do this here. IV. The BLM s NEPA Analysis Fails to Protect Ambient Air Quality Standards Congress passed the Clean Air Act in order to protect the public health and welfare. One way the Clean Air Act meets this goal is by establishing National Ambient Air Quality Standards ( NAAQS ). 42 U.S.C. 7408(a)(1); Envt l Prot. Agency, Air Emissions Inventories, 3

23 In order to implement this mandate, EPA has designated six criteria pollutants under the NAAQS. Among these are ozone and nitrogen oxides, or NOx. See 40 C.F.R. Part 50. Both of these pollutants can stem from oil and gas development. See EPA Region 8, An Assessment of the Environmental Implications of Oil and Gas Production: A Regional Case Study (2008), In the EA for the Slaughterville well, the BLM simply states that [p]otential emissions of particulate matter, nitrogen oxides, sulfur dioxide, carbon monoxide, volatile organic compounds, hazardous air pollutants, and greenhouse gases were estimated and impacts analyzed for projected oil and gas development in the BLM Miles City Field Office Proposed Resources Management Plan, Final Environmental Impact Statement, June EA at 18. But, in order to meet the requirements of NEPA, the BLM must do a site-specific analysis for this well and the other two wells, as well as any similar wells proposed in Big Horn or adjacent counties. The BLM s RMP does not analyze shale development in Big Horn county. Thus, a gap in the NEPA analysis remains. V. The BLM Fails to Meet the Endangered Species Act Section 7 Consultation Requirements Congress passed the Endangered Species Act in 1973 to provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved, [and] to provide a program for the conservation of such endangered species and threatened species. Endangered Species Act of , 16 U.S.C. 1531(b) (2012). Section 7 of the Act the federal government to insure that any action authorized, funded, or carried out by such agency... is not likely to jeopardize the continued existence of any endangered species or threatened species or result in the destruction or adverse modification of [critical] habitat of such species. Id. 1536(a)(2). Thus, a federal agency 1) must ask FWS whether any threatened or endangered species may be present in the area of the proposed action, 2) if a species is present, the agency must prepare a biological assessment to determine if the species is likely to be affected, and 3) if the species is likely to be affected, the agency must formally consult with the Service and issue a Biological Opinion. 5 Based on the BLM s cursory NEPA analysis at this point, Guardians believes that the BLM is not meeting the requirements of Section 7 of the ESA. 5 Thomas v. Peterson, 753 F.2d 754, 763 (9th Cir. 1985) (citing 16 U.S.C. 1536(b)(4)(ii)-(iii)). 4

24 In sum, the BLM must take a hard look at the impacts of opening up a new area to the impacts of fracking and horizontal drilling, and its current NEPA analyses fail to meet this threshold. Sincerely, Rebecca Fischer Climate Guardian WildEarth Guardians 2590 Walnut St. Denver, CO

25 Exhibit 2

26 United States Department of the Interior Bureau of Land Management DOI-BLM-MT-CX-C CX September 23, 2016 Fort Worth Operating Company LLC Permit to Drill the Clark Farms #29-10 Location: T. 29 N., R. 50 E., Section 29, (NW¼SE¼) Roosevelt Co U.S. Department of the Interior Bureau of Land Management Miles City Field Office 111 Garryowen Road Miles City, MT Phone: FAX:

27 Energy Policy Act of 2005 Section 390 CX Review and Documentation Form UNITED STATES DEPARTMENT OF INTERIOR BUREAU OF LAND MANAGEMENT MILES CITY FIELD OFFICE CATEGORICAL EXCLUSION REVIEW AND APPROVAL For Activities Associated with Oil and Gas Development Under Section 390 of the Energy Policy Act of 2005 Project Name: Fort Worth Operating Company LLC, Permit to Drill the Clark Farms #29-10 NEPA Number: DOI-BLM-MT-CX-C CX Lead Preparer: Dan Fox Project Description The proposed action is to use an existing well pad and an existing access road to drill a horizontal well bore in the Three Forks Formation. The well would be drilled on an existing private well pad located on the Fort Peck Indian Reservation. The existing well pad is approximately 200 X 200. The surface location of the well is on Fee Surface/Fee Minerals in Section 29, T. 29 N., R. 50 E., with the horizontal lateral terminating in Indian Lease (NW¼SE¼) of Section 32, T. 29 N., R. 55 E. (See table 1). After the well is drilled, it would be tested and if commercial quantities of oil or gas are discovered, the well would be completed for production and production facilities would be installed on the well pad. Drilling is expected to begin in August of 2017 as soon as all the necessary permits have been obtained. The drilling operations are expected to take approximately 30 days and the completion operations are expected to take 7 days. The well would be drilled and completed in full compliance with all applicable laws, regulations (43 CFR 3100), Onshore Oil and Gas Orders, the Application for Permit to Drill (APD) and any Conditions of Approval. Table 1. Surface and Bottom Location of Proposed Federal 1-31H. Well Name and Surface and Bottom Locations of Proposed Well Number/Lease No. Surface Hole Bottom Clark Farms #29-10 / T. 29 N., R. 50 E., Section 29, (NW¼ SE¼) T. 29 N, R. 50 E, Section 32, (NW¼SE¼) Surface Owner Private Access The existing access road is off an improved road and is surfaced with gravel. The proposed well is approximately eleven (11) miles north northwest (straight-line distance) of Poplar, Montana. The existing well access road is a developed all weather road that was built to access the existing fee well. This access road was constructed in accordance with the guidelines established for oil & gas exploration and development activities as referenced in the joint BLM/USFS publication: Surface Operating Standards for Oil and Gas Exploration and Development, Fourth Edition and/or BLM Gold Book (Gold Book). Well Pad and Drilling An existing fee well pad would be used to drill the proposed well. The existing well pad is approximately 200 x 200. Page 2 of 14

28 All drilling fluids would be contained in a closed loop drilling mud system, removed and disposed of at an approved facility. Any produced water and/or oil recovered during testing would be stored in test tanks on location. Water based mud would be self-contained in the closed loop mud system and be disposed of at a commercial disposal facility when work is completed. Any chemicals which are in integral part of the drilling fluid would be disposed of in the same manner as the drilling fluids. Disposal of all solids and liquids (drilling fluids/cuttings, produced water, trash, and sewage) would meet all state and county requirements. The proposed Clark Farms well would be drilled to a proposed total measured depth (MD) of 12,722 feet to test the Three Forks formation for commercial quantities of oil. Aquifers and other sub-surface resources are isolated and protected by three existing casing strings, all cemented to surface. An appropriately sized Blowout Preventer (BOP) would be used to control the well and prevent an accidental release of hydrocarbons or salt water into the environment. Proposed Facilities The associated production facilities for this well located on site would consist of a pumping unit, anchors, and a power drop. Tank battery planned for this well is located on location. Facilities include a heater-treater, recycle pump/shed, six 400 bbl oil tanks and 400 bbl produced water tanks. A Sundry Notice will be submitted after the well is completed and identify how the production facility will be laid out. To comply with visual resource management, the production facilities would be painted Shale Green to blend into the surrounding background color of the landscape. The tanks, heater treater, and recycle pump/shed would be surrounded on four sides by an impermeable dike of sufficient capacity to contain the contents plus one day s production. Interim Reclamation After this well is completed for production, the location and surrounding area would be cleared of all unused tubing, equipment, debris, materials, trash, and items not required for production. During the production phase the pad would be reduced and recontoured to accommodate only as much of the area that is needed for production. The top soil areas would be seeded promptly after completion of drilling operations, depending on season/weather constraints. The existing well pad is located in an agricultural field, after will pad has been reduced down to accommodate production activities an agricultural crop would be seeded by the surface owner. Final Reclamation A Notice of Intention to Abandon (Form #3160-5) would be filed with the Authorized Officer within five (5) days following the granting of oral approval to plug and abandon. A subsequent Report of Abandonment (Form #3160-5) would be submitted within thirty (30) days following the actual plugging of the well bore. This report would indicate where plugs are placed and the current status of surface restoration operations. A follow-up report on Form # would be filed when all surface restoration work has been completed and the location is ready for final inspection. The well would be plugged according to federal or state requirements. After the well is plugged, the location would be cleared of all facilities, liner, equipment, and the surface reclaimed. The surfacing material would be removed. Buried flow lines would either be purged with fresh water and plugged or removed. Oil, oily waste, hydrocarbons, salt water or other fluids harmful to the environment which might be present in the abandoned pipeline shall not be spilled onto the ground during purging operations and must be properly disposed of. The well site and other disturbed areas would be recontoured and seeded according to the surface owner s requirements. Erosion control measures would be installed as needed. An abandonment marker would be installed in the well bore and it would be 4 below ground level. Page 3 of 14

29 If the well is a dry hole or during final reclamation all facilities would be removed and the surfacing material would be removed unless another well located on site is still producing. The entire well pad would be reclaimed back to near natural condition s, re-contouring all cut and fills slopes, and establishing all natural drainage. The access road located on private would be reclaimed to near natural conditions; removing surfacing material, re-contouring all cut and fills slopes, and establishing all natural drainage, and seeded. The road would remain only if surface owners and Fort Worth Operating Company LLC have an agreement to leave the access road for the landowner s use. Project Location: T. 29 N., R. 50 E., Section 29, (NW¼SE¼) in Roosevelt Co, MT (See APD well location map). Authorities Oil and gas exploration and development activities are conducted under authority of the Indian Minerals Leasing Act of 1938 (25 United States Code [USC] 396a, et seq.), the Indian Mineral Development Act of 1982 (25 USC 2101, et seq.), and the Energy Policy Act of 2005 (42 USC 15801, et seq.). Energy Policy Act of 2005 Section 390 Categorical Exclusion Review The proposed activity has been determined to be statutorily categorically excluded from NEPA documentation in accordance with Section 390 of the National Energy Policy Act of X 2. Drilling an oil and gas well on a location or well pad at a site which drilling has occurred within five (5) years prior to the date of spudding the well. The proposed action is to use an existing well pad and an existing access road to drill a horizontal well bore in the Three Forks Formation in Roosevelt Co., MT. The well would be drilled on the existing fee well pad. The Federal #1-5 oil well was permitted to drill by the BLM in September 21, 2011 and was spudded November 19, The well pad and access road have been previously disturbed within the last 5 years. Land Use Plan Conformance and Categorical Exclusion Review Record Assigned Specialist Resource/Title Signature Date Surface Issues/Natural Resource Specialist Dan Fox Drilling Plan/Petroleum Engineer Paul Helland /s/ Kathy Bockness 9/23/2016 ENVIRONMENTAL COORDINATOR DATE Persons and Agencies Consulted The Application for Permit to Drill (APD) for this well has been posted for 30 days on the Miles City Pending APDs website. No comments or telephone calls related to this APD have been received. The well would be drilled in full compliance with the Endangered Species Act, the National Historic Preservation Act, regulations (43 CFR 3100), Onshore Oil and Gas Orders, the APD, and the Conditions of Approval. The team members reviewing the proposal and conducting or participating in the preparation of this worksheet are listed below. Page 4 of 14

30 Decision and Rationale on Action I have decided to implement the use of an existing well pad and an existing access road to drill a horizontal well bore in the Three Forks Formation in Roosevelt Co., MT. The proposed horizontal well would be drilled on private surface estate, with a portion of the horizontal well bore drilled through the federal mineral estate and subject to a allotted mineral lease for the respective horizontal well bore (lateral). The well would be drilled in full compliance with all applicable laws, regulations (43 CFR 3100), Onshore Oil and Gas Orders, the Application for Permit to Drill (APD) and the Conditions of Approval. Further, I have reviewed the proposal to ensure the appropriate exclusion category as described in Section 390 of the Energy Policy Act of 2005 has been correctly applied. It is my determination that no further environmental analysis is required. Implementation Date This project would be implemented as soon as all the necessary permits have been obtained. The drilling operations are expected to take approximately 30 days. If the well has not been spudded by November 19, 2016, this APD will expire and the operator is to cease all operations related to preparing to drill the well. The well would be conducted in full compliance with all applicable laws, regulations (43 CFR 3100), Onshore Oil and Gas Orders, the Application for Permit to Drill (APD) and the Conditions of Approval. /s/ Shane Findlay 9/23/2016 Shane Findlay Assistant Field Manager Miles City Field Office Date Page 5 of 14

31 Map 1- Well Location Page 6 of 14