UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

BILL BARRETT CORPORATION, ) ) Plaintiff, ) ) v. ) Civil Case No. 09-19 (RJL) ) UNITED STATES DEPARTMENT ) OF THE INTERIOR, et al., ) ) Defundanh, ) ) and ) ) BTU WESTERN RESOURCES, INC., ) ) Intervenor-Defendant. )

1"'- MEMORANDUM OPINION (March II ,2009)

Plaintiff Bill Barrett Corporation ("BBC") has filed suit under the

Administrative Procedure Act ("APA") challenging the U.S. Bureau of Land

Management's ("BLM") grant of a coal exploration license to BTU Western

Resources, Inc. ("BTU"). BBC claims that the exploration license must be set

aside because it lacks sufficient stipulations to protect BBC's rights to extract

coalbed natural gas ("CBNG") under preexisting licenses should BBC's wells be

contaminated by BTU's coal exploration drilling. Presently before the Court is

BBC's motion for a preliminary injunction enjoining the government from

allowing coal exploration under the license to proceed pending resolution of the

1 case on the merits.! Because BBC has failed to establish the requisite likelihood

of irreparable harm to warrant a preliminary injunction, its motion is DENIED.2

BACKGROUND

Under the Federal Land Policy Management Act of 1976, it is the United

States' policy that management of public lands "be on the basis of multiple use

and sustained yield." 43 U.S.c. § 1701(a)(7). Consistent with that policy, BLM

regulations provide that the grant of a permit or lease to develop anyone mineral

on public land "shall not preclude" the issuance of other permits or leases for the

development of other minerals on the same land, so long as there exist "suitable

stipulations for simultaneous operation."

. One such form of

multiple use - and the form at issue in this case - is the simultaneous extraction of

both natural gas and coal from a resource-rich tract of public land. See

§

3400.1(b).

BBC operates approximately 108 CBNG wells in the "Porcupine Field" in

Wyoming's Powder River Basin pursuant to numerous federal oil and gas leases.

(Mot. for Prelim. Inj. [Dkt. #3], Ex. A, Tracy Galloway Aff. ~ 2, Sept. 12,2008.)

Neighboring BBC's CBNG operation is BTU's coal-mining operation, which

Plaintiff also seeks identical relief under Section 705 of the AP A in the form of a postponement of the effective date of the exploratory license.

. 2 Plaintiff filed the instant motion on January 7,2009, seeking both a temporary restraining order and a preliminary injunction. ([Dkt. #3].) The Court held an abbreviated hearing later that day, after which the Court issued an order temporarily restraining and enjoining the defendants from allowing coal exploration operations under the license to proceed between that date and January 17,2009. (Minute Order, Jan. 7, 2009.) The Court subsequently heard full oral argument on January 13,2009 on whether a preliminary injunction should issue upon the temporary restraining order's lapse.

2 extracts coal from the North Antelope Rochelle surface mine. In February 2007,

BTU submitted an application to BLM for a federal coal exploration license to

allow BTU to explore the coal reserves underlying the Porcupine Field and collect

certain geologic data. (Defs.' Mem. In Opp. [Dkt. #5], Ex. A, Michael J. Karbs

Decl. ~ 2, Jan. 6, 2009.) Such exploration entails drilling numerous small core

holes into the field's coal bed and is a necessary precursor to a competitive bid

process for a coal lease, as the data collected enables BLM to meet its

3 responsibility to ensure that the public receives fair market value for the coal.

(Karbs Decl. ~~ 5-6);

(c)(l). BTU sought the exploration

license in order to advance its effort to secure a coal lease.

BBC, while ostensibly not objecting to mUltiple use of the Porcupine Field,

claims that exploratory drilling will irreparably harm its CBNG operation. BBC

uses a vacuum technique to produce CBNG, employing two compressors that

create negative pressure in the coal reservoir. (Galloway Aff. ~ 2.) The

compressors are sensitive to the presence of oxygen in the gas stream, which can

render the CBNG unmarketable. If either compressor detects oxygen exceeding

10 parts per million for a period of ten minutes, the compressor will automatically

shut down. (Jd.) To rectify such so-called "oxygen contamination," BBC must

vent and flow all of the gas lines leading to the compressor, purging the CBNG in

the lines to the atmosphere. (Jd. ~ 3.) This is a time consuming and costly

3 In this instance, BLM asserts that it lacks adequate data for fair market valuation of approximately two and one half square miles of the Porcupine Field containing an estimated 169,000,000 tons of coal. (Karbs Decl. ~ 8.)

3 procedure, compounded by the loss of the purged CBNG's sale value. (Id.) BBC

contends that due to the Porcupine Field's geologic makeup, specifically the

permeability and porosity of the coal, exploratory drilling will cause oxygen

contamination to occur. (Compi. [Dkt. #1] ~ 22; PI.'s Mem. In SUpp. at 1.)

BBC contacted BLM in October 2007 to notify the agency of its concerns.

BBC and BLM thereafter traded multiple letters over the next nine months as BBC

provided BLM with additional technical information, at BLM's request. Upon

consideration ofBBC's submissions and protests, BLM recognized that a risk of

oxygen contamination existed, but concluded in a decision issued August 12, 2008

that the risk was too uncertain to warrant denying BTU's application altogether.

(Mot. for Prelim. Inj., Ex. B, BLM Decision at 2,6.) BLM instead crafted a

phased drilling approach and stated its expectation that, pursuant to the standard

simultaneous-use stipulations to be included in the license, BTU would be

obligated to compensate BBC for any verified damage as a result of its exploratory

drilling. 4 (Id. at 5-6.) Not satisfied, BBC filed an appeal with the Interior Board

of Land Appeals ("IBLA"), but the IBLA failed to act within the regulations'

allotted time period, rendering BLM's decision on the license effective and final in

late October 2008. 5 BLM formally issued BTU the coal exploration license on

4 Under the phased drilling approach, BTU is authorized to drill the ten most important core holes for data collection purposes in a first round of drilling. (BLM Decision at 5-6.) If adverse effects on BBC occur, BTU can then waive or defer drilling the remaining 38 proposed core holes. (Id.) 5 Under the relevant regulations, BBC's notice of appeal and petition for a stay automatically stayed the effectiveness of BLM' s decision pending the IBLA' s ruling.

(a)(l). IBLA's failure to act within 45 calendar days after the expiration of

4 December 30,2008, and BBC filed the present suit and motion for a preliminary

injunction January 7, 2009. BBC's primary contention is that BLM's decision was

arbitrary and capricious, an abuse of discretion, not in accordance with law, and in

violation ofBBC's lease because the exploratory drilling will unreasonably

interfere with BBC's CBNG operation and the license's stipulations do not

adequately prevent such harm or compensate BBC for any damages incurred if

oxygen contamination should occur. 6 (Pl.'s Mem. In SUpp. at 9-22.)

DISCUSSION I. Legal Standard

"A preliminary injunction is an extraordinary remedy that should be

granted only when the party seeking the relief, by a clear showing, carries the

burden of persuasion." Cobellv. Norton,

(D.C. Cir. 2004)

(citing Mazurek v. Armstrong,

(1997)). As recently articulated

by the Supreme Court, in order to obtain a preliminary injunction a movant must

demonstrate: (1) that he is likely to succeed on the merits; (2) that he is likely to

suffer irreparable harm in the absence of preliminary relief; (3) that the balance of

equities tips in his favor; and (4) that an injunction is in the public interest. Winter

the time for filing a notice of appeal, however, automatically rendered BLM's decision effective and final.

§ 4.21(a)(3), (b)(4), (c). 6 BBC's lease provides: "Lessor reserves the right ... to authorize future uses upon or in the leased lands, including the approval of easements or rights-of-way. Such uses shall be conditioned so as to prevent unnecessary or unreasonable interference with rights of lessee." (Defs.' Mem. In Opp'n, Ex. 4, Offer to Lease and Lease for Oil and Gas at 2, § 6.) BBC also contends that BLM violated the National Environmental Policy Act and that BLM acted in excess of statutory authority by issuing the license for the express purpose of endowing BTU with negotiating leverage to be used against BBC to reach a reasonable accommodation. CPl.'s Mem. In Supp. at 22-31.)

5 v. Natural Res. De! Counsel,

(2008); see also CityFed Fin.

Corp. v. Office a/Thrift Supervision,

, 746 (D.C. Cir. 1985). While

these factors interrelate on a sliding scale, CityFed Fin. Corp., 58 F.3d at 747, the

movant must, at a minimum, "demonstrate that irreparable injury is likely in the

absence of an injunction," Winter,

(citing Los Angeles v. Lyons,

(1983)) (emphasis in original). Indeed, because "the basis of

injunctive relief in the federal courts has always been irreparable harm," a

movant's failure to establish irreparable harm is grounds for denying a motion for

preliminary injunction without considering the other factors. CityFed Fin. Corp.,

58 F.3d at 747 (citation omitted). For the following reasons, the Court finds that

BBC's motion fails on this basis.

II. Irreparable Harm

Our Circuit has set a high standard to establish irreparable harm.

Chaplaincy a/Full Gospel Churches v. England,

(D.C. Cir.

2006). First, the injury "must be both certain and great; it must be actual and not

theoretical."

(quoting Wis. Gas Co. v. FERC,

, 674 (D.C. Cir.

1985) (per curiam)). The moving party must show "[t]he injury complained of is

of such imminence that there is a 'clear and present' need for equitable relief to

prevent irreparable harm." Id. Second, the asserted injury must be beyond

remediation. As stated by the D.C. Circuit:

Mere injuries, however substantial, in terms of money, time and energy necessarily expended in the absence of a stay[,] are not enough. The possibility that adequate compensatory or other

6 corrective reliefwill be available at a later date, in the ordinary course of litigation[,] weighs heavily against a claim of irreparable harm.

Wis. Gas Co., 758 F.2d at 674 (quoting Va. Petroleum Jobbers Ass 'n v. FPC,

, 925 (D.C. Cir. 1958)). Indeed, it is well-settled that monetary loss

constitutes irreparable harm "only where the loss threatens the very existence of

the movant's business." Id.

To support its position that oxygen contamination is likely to occur, BBC

points to three pieces of evidence: its experiences with oxygen contamination in

connection with the clean-out of CBNG wells at the nearby Pronghorn Field,

(Mot. for Prelim. Inj., Ex. A, Dec. 12,2007 Letter at 1-5); oxygen contamination

that occurred as a result of the drilling of a water well in the vicinity of the

Porcupine Field, (Jd., Apr. 1, 2008 Protest Letter at 19-21); and a three-page

technical report prepared for BBC by petroleum engineer J. Craig Creel (the

"Creel Report"), which analyzed the water well incident and concluded that "[i]f

any of the ten proposed core holes are drilled, oxygen will be introduced into the

producing coal seam reservoir and subsequently, into the BBC gas gathering

system," (Jd., Minimum Safe Core Hole Drilling Distance Report at 3). BLM,

however, determined that the Pronghorn Field evidence, while somewhat

analogous, entailed significantly different field conditions. (BLM Decision at 2.)

BLM similarly determined that the water well incident also entailed significantly

different circumstances, including that the diameter of the water well was much

bigger than the diameter of exploratory core holes, lending the evidence and the

7 Creel Report little predictive value. (BLM Decision at 3; Mot. for Prelim. Inj., Ex.

A, BLM Review of J. Craig Creel Report at 1-4, July 22,2008.) Finally, BLM

and BTU note that the State of Wyoming, in seeking leave to participate in BBC's

IBLA appeal, stated that it was "unaware of any harm of the nature [BBC] asserts

ever occurring in Wyoming," a conclusion consistent with BLM's understanding

based on its own investigation. (Defs.' Mem. In Opp., Ex. 7, Wy. Mot. for Leave

to File Amicus Br. ~ 1, Sept. 25, 2008; BLM Decision at 2-3.)

The Court finds that the weight of the evidence is, at best, inconclusive as

to whether oxygen contamination is likely to occur. While BBC's evidence

establishes oxygen contamination is a possibility, BLM, in its expert judgment,

determined, after evaluating BBC's evidence and inquiring into the experiences of

similarly situated CBNG operators, that the risk of oxygen contamination "does

not appear to be proven with any certainty." (BLM Decision at 2-3.) This Court,

of course, must give due deference to BLM in matters within the agency's

technical expertise, particularly where predictive judgments are at issue. See Am.

Wildlands v. Kempthorne,

(D.C. Cir. 2008) ("The rationale for

deference is particularly strong when the [agency] is evaluating scientific data

within its technical expertise[.]" (citation omitted)); BNSF Ry. Co. v. Surface

Transp. Bd.,

(D.C. Cir. 2008) ("It is well established that an

agency's predictive judgments about areas that are within the agency's field of

discretion and expertise are entitled to particularly deferential review, so long as

they are reasonable." (citation omitted)). Giving BLM that deference, this Court is

8 not persuaded that BLM's judgment was in error. Thus, in the absence of new

evidence at this stage establishing that the harm BBC alleges is likely to occur,

BBC has failed to establish the requisite risk of irreparable harm to warrant a

preliminary injunction.

Finally, it bears noting that BBC has also has failed to establish that

the harm it contends will occur is of an irreparable nature. See Wis. Gas Co., 758

F.2d at 674. BBC contends that oxygen contamination caused by exploratory

drilling "will impose significant losses upon BBC, both in terms of costs of labor

and the costs of lost and delayed production and associated revenues, and also in

terms of the irrevocable loss ofCBNG natural resource that will have to be vented

to the atmosphere before production can resume." (Pl.'s Mem. In Supp. at 33.)

Assuming so, however, BBC has not established that the exploratory drilling will

irreparably destroy BBC's ability to produce CBNG. Indeed, BBC has been able

to return contaminated wells to production in just over nine days. (Mot. for

Prelim. Inj., Ex. A, May 9, 2008 Letter at 3.) Moreover, BBC has not established

that corrective or compensatory relief is otherwise unavailable. Despite BBC's

attempt to shift the burden to the defendants, it is BBC's burden to establish, "by a

clear showing," Cabell,

, that no adequate remedy at law exists,

Wis. Gas Co., 758 F.2d at 674. While BBC cannot pursue compensatory damages

under the APA,

, it may, as it itself has acknowledged, be able to

pursue both a breach of contract claim and a takings claim against the United

States for unreasonably interfering with BLM's existing leases, (Mot. for Prelim.

9 Inj., Ex A, Apr. 1,2008 Letter at 10 (citing Del Rio Drilling Programs, Inc. v.

United States,

(Fed. Cir. 1998))). See also Amber Res. Co. v.

United States,

(Fed. Cir. 2008) (affirming Court of Federal

Claim's jurisdiction over contract-based claims arising from mineral leases).

Accordingly, because the injury BBC asserts is of a monetary nature and because

BBC has failed to establish by a clear showing that it has no other adequate

remedy, BBC's motion for a preliminary injunction must be denied on this basis as 7 well. An appropriate Order will issue with this Memorandum Opinion.

, Q~ RICHAR . LEON United States District Judge

7 BBC's failure to establish irreparable hann is also fatal to BBC's request for relief under Section 705 of the AP A, which grants a reviewing court authority to postpone the effective date of an agency action "to the extent necessary to prevent irreparable injury."

.

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