	Introduction

Hydraulic fracturing is a technique used to recover oil and natural gas from underground low permeability rock formations. The technique has been the subject of controversy because of the potential effects that hydraulic fracturing and related oil and gas production activities may have on the environment and health. Actions that fit within a categorical exclusion (CE) undergo a relatively low level of review because these are actions that an agency has found do not have a significant effect on the environment. An environmental assessment (EA) provides a more comprehensive level of review and may be prepared when an agency wishes to determine whether an action requires the preparation of an environmental impact statement (EIS). An EIS is the most comprehensive NEPA document; it requires, among other things, that the agency explain how the proposed action will affect the environment; what unavoidable adverse environmental effects will result; and what alternatives to the proposed action exist. This report provides an overview of three situations in which parties have argued that agencies do not need to conduct a comprehensive environmental review of hydraulic fracturing under NEPA. The court held that BLM unreasonably relied on an environmental analysis that (1) assumed only one exploratory well would be drilled on the leased acres when it was reasonably foreseeable that more wells would be drilled, and (2) did not contain a detailed assessment of the environmental impacts of hydraulic fracturing and horizontal drilling. Delaware River Basin Commission (DRBC): Proposed Regulations on Natural Gas Development

In May 2011, New York Attorney General Eric Schneiderman brought a federal lawsuit on behalf of the state of New York alleging that five federal agencies and their officers were in violation of NEPA. New York alleged that the approval of the DRBC regulations was a major federal action requiring at least one of the defendants to prepare an EIS. In September 2012, the United States District Court for the Eastern District of New York granted the defendants' motions to dismiss New York's complaint for lack of subject matter jurisdiction. Rural Development has issued an administrative notice stating that the existence of drilling leases on a property will not prevent the agency from using a categorical exclusion (CE) to exempt these loans from further NEPA review, at least in ordinary circumstances. On March 18, 2012, a news article appeared suggesting that Rural Development was reconsidering the use of a CE for loans made for the purchase of homes on properties leased for drilling. NEPA requires federal agencies to consider the environmental consequences of the actions they propose to take by preparing a NEPA document. In March 2013, a federal district court in California held that BLM had violated NEPA and the APA when it prepared an EA and FONSI for a lease sale in the Monterey Shale.
Hydraulic fracturing is a technique used to recover oil and natural gas from underground low permeability rock formations. This process involves pumping fluids under high pressure into the formations to crack them, releasing oil and gas into the well. The technique has been the subject of controversy due to some of its potential effects on the environment.
The National Environmental Policy Act (NEPA) requires federal agencies to consider the potential environmental consequences of the actions they propose to take by preparing one of three NEPA documents. Actions that fit within a categorical exclusion (CE) undergo a relatively low level of review because these are actions that an agency has found do not have a significant effect on the environment. A CE may not be used when extraordinary circumstances occur. An environmental assessment (EA) provides a more comprehensive level of review and may be prepared when an agency wishes to determine whether an action requires the preparation of an environmental impact statement (EIS). An EIS is the most comprehensive NEPA document; it requires, among other things, that the agency explain how the proposed action will affect the environment; what unavoidable adverse effects will result; and what alternatives to the proposed action exist.
This report provides an overview of three situations in which parties have argued that agencies do not need to conduct a comprehensive environmental review of hydraulic fracturing under NEPA. In March 2013, a federal district court in California held that the Bureau of Land Management (BLM) had violated NEPA and the Administrative Procedure Act (APA) when it prepared an EA and Finding of No Significant Impact (FONSI) for a lease sale in the Monterey Shale. The court held that BLM could not rely on an analysis that (1) assumed that only one exploratory well would be drilled on the leased acres, and (2) did not contain a detailed assessment of the impact of hydraulic fracturing and horizontal drilling on the environment.
In 2011, New York Attorney General Eric Schneiderman filed a complaint on behalf of the state of New York alleging that the Delaware River Basin Commission (DRBC) and five federal agencies were in violation of NEPA. New York sought an injunction compelling the defendants to prepare an EIS before the defendants adopted regulations that would allow natural gas development in the basin. In September 2012, the United States District Court for the Eastern District of New York granted the defendants' motions to dismiss New York's complaint for lack of subject matter jurisdiction.
On March 21, 2012, the U.S. Department of Agriculture Rural Development agency reaffirmed its use of a CE to exempt from further NEPA review the loans it makes for the purchase of single-family homes on properties leased for drilling. The agency stated that, by itself, the existence of a drilling lease on a property is not an extraordinary circumstance that will prevent the agency from using a CE for a loan.