Becerra v. U.S. Dep't of the Interior

Decision Date30 August 2017
Docket NumberCase No. 17–cv–02376–EDL
Citation276 F.Supp.3d 953
Parties Xavier BECERRA, et al., Plaintiffs, v. UNITED STATES DEPARTMENT OF the INTERIOR, et al., Defendants.
CourtU.S. District Court — Northern District of California

Mary Tharin, California Attorney General's Office Environment Section, Oakland, CA, Ari Biernoff, New Mexico Attorney General's Office, Santa Fe, NM, William G.Grantham, Pro Hac Vice, NM Attorney General's Office Albuquerque, NM, for Plaintiffs.

Rebecca Jaffe, US Department of Justice, Washington, DC, for Defendants.

ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT

Re: Dkt. No. 13

ELIZABETH D. LAPORTE, United States Magistrate Judge

In this case, Plaintiffs People of the State of California, ex rel. Xavier Becerra, Attorney General, and People of the State of New Mexico, ex rel. Hector Balderas, Attorney General, seek a declaration that that the action of Defendants United States Department of the Interior ("DOI"), Office of Natural Resources Revenue ("ONRR"), Secretary of the Interior Ryan Zinke, and Director of the ONRR Gregory Gould violated the Administrative Procedure Act ("APA") and an injunction requiring Defendants to vacate the postponement of and reinstate the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation rule at 81 Fed. Reg. 43,338 (July 1, 2016) (the "Rule"). On June 2, 2017, Plaintiffs moved for summary judgment. Dkt. No. 13. Defendants opposed on July 20, 2017, and Plaintiffs replied on August 4, 2017. Dkt. Nos. 26 & 27. On August 22, 2017, the Court heard argument on Plaintiffs' motion. For the reasons stated below, the Court GRANTS Plaintiffs' motion for summary judgment.

I. FACTUAL BACKGROUND

In 2007, ONRR's Subcommittee on Royalty Management issued a report with several recommendations regarding mineral revenue collection from Federal and Indian lands. Dkt. No. 15–9, Ex. 9, 90 Fed. Reg. 608. ONRR engaged in a rulemaking process and issued two advanced notices of proposed rulemaking in May 2011. Dkt. No. 15–7, 76 Fed. Reg. 30,878 ; Dkt. No. 15–8, 76 Fed. Reg. 30,881. One advanced notice requested comments and suggestions before proposing changes to the regulations governing the valuation of oil and gas produced from Federal leases for royalty calculation. Dkt. No. 15–7, 76 Fed. Reg. 30,878. The other requested comments and suggestions before proposing changes to the regulations governing the valuation of coal produced from Federal and Indian leases, also used to calculate royalties. Dkt. No. 15–8, 76 Fed. Reg. 30,881. After receiving responses to the call for comments and conducting six public workshops, ONRR issued a proposed rule entitled "Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform" (the "Proposed Rule") on January 6, 2015. Dkt. No. 15–9, Ex. 9, 90 Fed. Reg. 608. Approximately eighteen months later, on July 1, 2016, ONRR issued the final rule regarding the valuation of oil and gas production from Federal leases and coal production from Federal and Indian leases (the "Rule"). Dkt. No. 15–10, Ex. 10, 81 Fed. Reg. 43,338. ONRR set forth an effective date of January 1, 2017 for the Rule. Id. ONRR described the purpose of the Rule as follows:

(1) to offer greater simplicity, certainty, clarity, and consistency in product valuation for mineral lessees and mineral revenue recipients; (2) to ensure that Indian mineral lessors receive the maximum revenues from coal resources on their land, consistent with the Secretary's trust responsibility and lease terms; (3) to decrease industry's cost of compliance and ONRR's cost to ensure industry compliance; and (4) to provide early certainty to industry and to ONRR that companies have paid every dollar due.

Id. ONRR estimated that the Rule would increase royalty collections by between $71.9 million and $84.9 million. Id. at 43,359.

On December 29, 2016, various coal and oil industry groups challenged the Rule in three lawsuits filed in the United States District Court for the District of Wyoming, contending that the Rule was arbitrary and capricious. Dkt. No. 13–1, Mot. at 5. The Rule took effect on January 1, 2017, although first reports and royalty payments under the Rule were not due until February 28, 2017. Dkt. No. 26–1, Gould Decl. ¶ 4.

Between October 17, 2016 and December 15, 2016, ONRR conducted eleven training sessions on the Rule. Id. ¶ 4. According to Gould, the trainings revealed some confusion about the Rule. Id. During this training, ONRR received requests for guidance about how to comply with the Rule. Id. ¶ 5. ONRR responded that it could not provide guidance before the January 1, 2017 effective date and could not guarantee guidance by the end of February. Id.

On February 17, 2017, the plaintiffs in the District of Wyoming suits sent a letter to ONRR which "ask[ed] ONRR to postpone the implementation of the Rule under 30 U.S.C. § 705 of the Administrative Procedure Act." Id. ¶ 6. On February 22, 2017, Deputy Director of ONRR James D. Steward issued a letter stating that "[i]n light of the pending litigation, ONRR has decided to postpone the effective date of the 2017 Valuation Rule until the litigation is resolved pursuant to Section 705 of the Administrative Procedure Act." Dkt. No. 15–2, Ex. 2 at 1. The letter stated that the effective date of the Rule was January 1, 2017, with the first reports due on February 28, 2017. Id. According to the letter, those affected by the Rule "should continue to value, report, and pay royalties under the rules that were in effect prior to January 1, 2017," i.e., under the old regulation that the Rule replaced. Id. ONRR also published an announcement on its website stating, "Attention: The 2017 Valuation Rule has been stayed!" Dkt. No. 26–1, Gould Decl., Ex. 4.

On February 27, 2017, ONRR issued a notice in the Federal Register which postponed the Rule. Dkt. No. 15–12, Ex. 12, 82 Fed. Reg. 11,823. Referring to three separate petitions challenging the Rule in the District of Wyoming, ONRR wrote that "[i]n light of the existence and potential consequences of the pending litigation, ONRR has concluded that justice requires it to postpone the effectiveness of the 2017 Valuation Rule pursuant to 5 U.S.C. § 705 of the Administrative Procedure Act, pending judicial review." Id.

On March 23, 2017, ONRR moved to stay the three cases in the District of Wyoming because they were developing a notice of proposed rulemaking to repeal the Rule. Dkt. No. 15–3, Ex. 3. On April 4, 2017, ONRR issued an advance notice of proposed rulemaking. Dkt. No. 15–14, Ex. 14, 82 Fed. Reg. 16,325. In it, ONRR sought comments and suggestions about whether revisions to the Rule were necessary and, if so, what revisions. Id. On the same day, ONRR proposed to repeal the Rule. Dkt. No. 15–13, Ex. 13, 82 Fed. Reg. 16,323. On April 27, 2017, the district court granted the requested stays. Dkt. No. 15–5, Ex. 5. On August 7, 2017, ONRR published a final rule repealing the Rule, with an effective date of September 6, 2017 ("Repeal Rule"). Dkt. No. 35.

II. PROCEDURAL HISTORY

On April 26, 2017, Plaintiffs filed a complaint seeking declaratory and injunctive relief. Dkt. No. 1. Plaintiffs alleged that Defendants' actions violated 5 U.S.C. sections 553, 705, and 706, and sought a declaratory judgment that Defendants acted arbitrarily, capriciously, contrary to law, abused their discretion, and failed to follow the required procedure in their delay of the Rule. Id. ¶¶ 36–45; p. 9. Plaintiffs also requested that the Court vacate Defendants' postponement of the Rule, enjoin Defendants to reinstate the Rule, award Plaintiffs their costs, expenses, and reasonable attorneys' fees, and award such other relief as the Court deems just and proper. Id. at 9–10.

On June 2, 2017, Plaintiffs moved for summary judgment. Dkt. No. 13. Plaintiffs argued that ONRR's postponement of the Rule violated the APA in two respects. First, Plaintiffs argued that ONRR incorrectly invoked Section 705 of the APA to postpone the effectiveness of the Rule after it had already gone into effect, contrary to the plain language of the statute. Second, Plaintiffs contended that ONRR effectively repealed the Rule without soliciting input from the public as required by the APA's provision for notice and comment. Id.

Oral argument was scheduled on July 11, 2017, pursuant to the normal briefing and hearing schedule under the local rules. L.R. 7–2(a). However, Defendants requested a thirty-day extension of Defendants' time to file their opposition, and postponement of oral argument until August 22, 2017 due to "personal and professional commitments" of their counsel. Plaintiffs agreed to the request, apparently as a professional courtesy. Guidelines for Professional Conduct, Northern District of California, Section 3.

On July 20, 2017, Defendants opposed the motion. Dkt. No. 26. They responded that ONRR's postponement was authorized under Section 705. Defendants also contended that the motion is premature because the Court has not yet issued a case management schedule and Defendants have not had sufficient time to produce the administrative record. Id. Defendants argued that the motion should be denied or dismissed as premature, or that consideration of it be stayed. Id.

On August 4, 2017, Plaintiffs replied. Dkt. No. 27. Plaintiffs argued that the meaning of effective date in section 705 is clear and does not authorize an agency to postpone a rule that is already in effect. Id., Reply at 1. Further, Plaintiffs contended that Defendants have not pointed to any need for examination of the administrative record to decide the purely legal question presented. Id.

On June 14, 2017, the States of Washington, Oregon, Maryland, and New York moved to file an amicus curiae brief in support of Plaintiffs. Dkt. No. 20. The Court granted their motion on June 16, 2017. Dkt. No. 21. Amici States argued that section 705 of the APA does not allow the retroactive suspension of a rule that has already gone into effect. Dkt. No. 20, Br. at 3. Furthermore, ami...

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