In 2012, while the company patiently waited for the regulatory process to conclude before developing its three remaining undeveloped leases, the BLM informed WillSource that those leases had been cancelled in 2009 and had expired two years later in November of 2011. This came as a complete surprise to Reed Williams who had been in constant contact with BLM and Forest Service officials and employees about his leases.
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Reed Williams, the owner of WillSource Enterprise, LLC, headquartered in Denver, has endured an expensive and protracted legal ordeal following the Bureau of Land Management’s (BLM) retroactive cancellation of his oil and gas leases in western Colorado. Williams applied for the energy leases in 1995, which were approved in 2003. In 2012 Williams was told his leases had been cancelled three years earlier. During the intervening time it appears that environmental special interests got involved and used lawsuits and lobbying efforts to convince the Obama Administration to shut down oil and gas activities in the Thompson Divide area. WillSource was just one of a number of oil and gas companies whose leases were illegally revoked. In November of 2016, Obama’s Interior Department cancelled 25 legal, up-to-date leases in western Colorado. What appears to be malicious stonewalling by the BLM and U.S. Forest Service has yet to be remedied in the courts, despite years of appeals and legal actions by WillSource. The Trump Administration, now with Interior Secretary Ryan Zinke named as the chief defendant in the case, has taken a very different approach to energy development on BLM lands, but it has yet to be seen whether or not the Williams family will have their full property rights restored.
On April 16, Mountain States Legal Foundation issued the following news release:
Family-Owned Energy Company Argues Illegal Cancellation of Its Leases
Mountain States Legal Foundation battles for the property rights of a small Colorado company subjected to bad faith dealing by federal agencies.
DENVER, CO. On Friday, WillSource Enterprise LLC, a small family-owned oil and gas company located in Denver, argued in Colorado federal district court that the Bureau of Land Management (BLM) illegally and retroactively cancelled three valid leases to prevent energy development in the White River National Forest in western Colorado. In an opening brief in its lawsuit WillSource alleges that the BLM operated in bad faith, purposefully delayed administrative decisions for months, and then arbitrarily and retroactively took illegal action to prevent WillSource from exercising its right to use its property. Mountain States Legal Foundation Attorney Christian Corrigan who filed the brief said, “By playing regulatory ‘hide-the-ball’ the BLM made it impossible for a responsible operator like WillSource to exercise its property rights.”
In 1996, WillSource was issued eight oil and gas west of Thompson Creek Divide. Over the decades, WillSource, which is owned by Reed Williams of Denver, worked diligently to comply with the various and everchanging requests and requirements of the BLM, the U.S. Forest Service, and State and local entities, as well as responding to protests from environmental groups that oppose any energy development in the White River National Forest. In 2012, while the company patiently waited for the regulatory process to conclude before developing its three remaining undeveloped leases, the BLM informed WillSource that those leases had been cancelled in 2009 and had expired two years later in November of 2011. This came as a complete surprise to Reed Williams who had been in constant contact with BLM and Forest Service officials and employees about his leases. In fact, the BLM and other agencies had continued to treat all eight of WillSource’s leases as valid existing leases in their meetings and as well as in their official documents. In fact, the federal government continued billing WillSource through 2015 for its annual payments on the wells capable of energy production, which included the three cancelled leases.
“What happened to Reed should happen to no one. He endured a nightmare of ever-changing demands, policies, and rulings in his efforts to satisfy the agencies all to no avail,” said William Perry Pendley of Mountain States Legal Foundation.
WillSource Enterprise, LLC, a small Colorado oil and gas exploration company located in Denver, holds eight oil and gas leases in the White River National Forest in Mesa County, Colorado, just west of an area commonly referred to as the Thompson Creek Divide. Some 80 federal oil and gas leases were issued throughout the Divide but environmental groups have used various political and legal tactics to prevent their development.
In 1995, WillSource was issued eight oil and gas leases, seven of which are in the Willow Creek Unit, which was approved in 2003 and consists of 8,643 acres of federal leases; WillSource is the designated operator. Environmental stipulations limit drilling in the unit to five months each year. In November of 2004, WillSource completed a well. Applications for Permit to Drill (APDs) two other wells in the unit were approved in 2004; both wells were granted yearly extensions from 2004 to 2009 as a result of conflicting and shifting BLM and U.S. Forest Service regulations, primarily as to a Forest Road the agency required WillSource to reengineer and rebuild so as to be allowed to drill. WillSource’s 2009 request for an extension was denied.
WillSource sought a “paying well determination” and approval of a participating area (PA), which the BLM granted by determining “Little Beaver #1-20 well” was capable of producing energy in paying quantities. The BLM made its determination in September of 2010, effective November of 2004.
In 2011, the Forest Service imposed new requirements on WillSource, including the hiring of a third party, licensed, road engineer and obtaining a $500,000 bond, which required a $300,000 collateral, funds WillSource lacks.
In November of 2011, the BLM wrote WillSource, “all lands not within the . . . [PA] . . . were automatically eliminated from the unit area effective November 11, 2009,” which invalidated three of WillSource’s seven leases. In June of 2012, the BLM issued an official decision eliminating the three leases from the unit.
WillSource immediately appealed the 2012 decision and made a formal presentation regarding its appeal in late January 2013. In January 2014, the Colorado State Director of the BLM upheld the 2012 decision.
On February 20, 2014, WillSource filed a notice of appeal and petition for stay to the IBLA. On March 3, 2014, the BLM filed an opposition to WillSource’s petition for stay. On March 19, 2014, Wilderness Workshop and the Natural Resources Defense Council filed a motion to intervene and a proposed opposition to WillSource’s petition for stay. On April 1, 2014, the BLM filed an opposition to the motion to intervene. On April 2, 2014, WillSource also filed an opposition to the motion to intervene. A decision on the motion to intervene is pending.
On March 20, 2014, WillSource filed its statement of reasons, outlining in great depth the unequitable actions taken by the BLM in regard to WillSource’s leases. On June 26, 2014, the BLM filed its answer and a motion to dismiss, in part, arguing that any attempt to challenge the original termination of WillSource’ s leases is untimely. On July 11, 2014, WillSource filed an opposition to the BLM’s motion to dismiss in part. The BLM filed a motion to strike WillSource’ s opposition, but, on August 26, 2014, the IBLA issued an order denying the BLM’s motion to strike. On October 26, 2015, the IBLA issued an order denying WillSource’s motion for hearing, granting Wilderness Workshop’s motion to intervene, and denying the BLM’s motion to dismiss.
In a related but separate appeal regarding the BLM’s denial of WillSource’s request for Suspension of Operations (SOP), WillSource, on May 9, 2014, filed a notice of appeal and petition for stay to the IBLA. Importantly, the IBLA must first determine the status of WillSource’s leases before it may issue further decisions relying on the cancellation of WillSource’s leases. On June 10, 2014, WillSource filed its Statement of Reasons. On June 12, 2014, WillSource filed a motion to consolidate this appeal with its earlier appeal. On June 30, 2014, the BLM filed its opposition to the motion to consolidate. On July 22, 2014, the IBLA denied WillSource’ s petition for stay but acknowledged that a decision in the earlier appeal is required before it will be able to issue a decision in the new appeal. On August 8, 2014, the BLM filed its Answer. Wilderness Workshop also moved to intervene. On October 26, 2015, the IBLA issued an order denying WillSource’s motion to consolidate its appeals, granting Wilderness Workshop intervention, and denying Wilderness Workshop’s motion to dismiss.
Meanwhile, by a decision dated October 5, 2015, the Colorado State Director upheld the denial of WillSource’s SOP request; however, that decision failed to consider some of WillSource’s specific arguments. On November 2, 2015, WillSource filed a notice of appeal to the IBLA. On December 17, 2015, WillSource filed its Statement of Reasons, to which, on February 18, 2016, the BLM responded by arguing that WillSource is not entitled to the requested SOP because it has wells capable of production on two of its leases. On March 3, 2016, WillSourece filed a reply brief.
In a related matter, on August 5, 2016, the BLM published its Notice of Availability of the Final EIS in which the BLM selected a combination of Alternatives 2 and 4 as its Preferred Alternative, which would cancel 25 undeveloped leases outright; would apply the stipulations from Alternative 2 to producing leases; and would apply the stipulations from Alternative 4 to non-producing leases. On September 2, 2016, WillSource again filed comments in response to the Final EIS, urging the BLM not to cancel any leases or otherwise attempt to modify valid existing leases. On November 17, 2016, the BLM issued the Record of Decision, which, surprisingly, does not attempt to cancel or otherwise substantively modify any of WillSource’s leases. On May 10, 2017, and May 31, 2017, the IBLA administrative law judge ruled against WillSource. On August 3, 2017, WillSource filed its complaint in Colorado federal district court.
For more about this case and Mountain States Legal Foundation, please visit here.
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