The U.S. Court of Appeals for the Third Circuit has once again cleared the way for drilling to continue in the Allegheny National Forest after a long battle between mineral rights owners, the U.S. Forest Service and environmental groups.

In a nonprecedential 10-page opinion issued Thursday in Minard Run Oil v. U.S. Forest Service — known as Minard Run IV — a three-judge panel said the U.S. District Court for the Western District of Pennsylvania was right to convert its initial grant of a preliminary injunction into a final declaratory judgment on the merits in favor of the mineral rights owners following the Third Circuit’s 2012 opinion in Minard Run III, in which it had upheld the injunction grant and found that an environmental impact study (EIS) did not need to be conducted before drilling operations commenced in the forest.

Third Circuit Judge Marjorie O. Rendell said U.S. District Judge Sean J. McLaughlin “properly considered our holdings in ACLU v. Mukasey and Pitt News v. Pappert in determining that the Minard Run III court had not stopped its analysis after concluding that plaintiff-appellees were likely to succeed on the merits of the preliminary injunction, but instead had decisively resolved the legal claims presented on appeal.”

Rendell was joined by Judges Kent A. Jordan and Joseph A. Greenaway Jr.

According to Rendell, the dispute erupted in 2009, when the Forest Service, which had been routinely issuing “notices to proceed” (NTPs) to drillers in the forest, entered into a settlement with several environmental groups in which the agency agreed to suspend drilling operations in the forest until it could complete a multiyear EIS pursuant to the National Environmental Policy Act of 1969 (NEPA).

Plaintiffs Minard Run Oil Co., the Pennsylvania Independent Oil and Gas Association, the Allegheny Forest Alliance and Warren County, Pa., subsequently sued the Forest Service and the environmental groups arguing that an EIS was not required, and McLaughlin issued a preliminary injunction in the plaintiffs’ favor, Rendell said.

In 2012, the Third Circuit upheld the injunction, finding that the Forest Service could authorize drillers to proceed without first conducting an impact study because, under the Weeks Act of 1911, the Forest Service’s control over mineral rights is limited to the agency regulations that are incorporated in writing in the instrument of conveyance. Therefore, the panel found, the agency’s issuance of an NTP did not constitute a major federal action under NEPA and did not necessitate an EIS, according to Rendell.

In light of the Third Circuit’s affirmance, McLaughlin converted his original preliminary injunction into a declaratory judgment on the merits and denied a cross-motion for summary judgment by the defendants, reasoning that the law of the case doctrine barred their arguments because the appeals court already addressed the issue of whether drilling could commence without an EIS, Rendell said.

On appeal from McLaughlin’s declaratory judgment order, defendants Allegheny Defense Project and the Sierra Club argued that McLaughlin improperly applied the law of the case doctrine because he failed to notify the parties that the disposal of the plaintiffs’ preliminary injunction motion could reach the merits, according to Rendell.

But Rendell said the Third Circuit held in both the Mukasey and Pitt News cases that a panel deciding a preliminary injunction appeal can decide the merits of the claim in cases where the facts have either been established or are irrelevant.

“To the extent that appellants argue that they were not given adequate notice that the decision on the motion for a preliminary injunction would reach the merits, Mukasey and Pitt News served as notice that this was a real possibility,” Rendell said, adding that Mukasey and Pitt News also established that decisions disposing of preliminary injunction appeals on the merits are binding on subsequent panels.

Turning to the defendants’ argument that the only issue McLaughlin reached on the merits in Minard Run III was that the Forest Service’s drilling moratorium was unlawful, Rendell said this argument appeared to be based on the false premise that the panel had an obligation to state its intention to rule on the merits of any other legal issues.

“This simply is not required of the court,” Rendell said. “The panel in Minard Run III could not have been more clear in indicating that it was not stopping its analysis after concluding that appellees were likely to succeed on the merits of their preliminary injunction, but rather was ruling on the underlying legal claims.”

Rendell rejected the defendants’ argument that McLaughlin and the Third Circuit went too far in construing the Weeks Act as restricting the Forest Service’s control over mineral rights in the forest.

“To call the court’s construction of the Weeks Act unnecessary, or to imply that it was dicta, is essentially to claim that a court may never actually reach the merits at the preliminary injunction stage. That is not the case,” Rendell said.

Rendell also dismissed the defendants’ argument that the Minard Run III panel’s interpretation of the Weeks Act was incorrect, saying Judge Jane Richards Roth, who wrote for the panel, “provided ample reasoning for the court’s statutory interpretation, which Judge McLaughlin quoted at length in Minard Run IV.”

“To the extent that appellants simply disagree with the conclusion reached, they could have sought en banc review,” Rendell said. “This panel will not disturb the well-reasoned legal conclusion reached by the prior panel.”

In a joint press release by the defendants, Bill Belitskus, board president of the Allegheny Defense Project, was quoted as saying the Third Circuit’s ruling created “two separate national forest systems.”

“On the one hand are the 154 national forests where the Forest Service can impose reasonable regulations to protect the national forest from private parties,” Belitskus said in the press release. “On the other hand is the Allegheny National Forest, where the oil and gas industry is allowed to drill as many wells as it wants virtually free from Forest Service regulation or public scrutiny.”

Counsel for the plaintiffs, R. Timothy McCrum of Crowell & Moring in Washington, D.C., said he and his clients were “very pleased” with the ruling.

Zack Needles can be contacted at 215-557-2493 or zneedles@alm.com. Follow him on Twitter @ZNeedlesTLI.

(Copies of the 10-page opinion in Minard Run Oil v. U.S. Forest Service, PICS No. 13-2723, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.)