Duncan Energy Co. v. U.S. Forest Service, 93-4005
| Citation | 50 F.3d 584 |
| Decision Date | 21 March 1995 |
| Docket Number | No. 93-4005,93-4005 |
| Parties | , 26 Envtl. L. Rep. 20,202 DUNCAN ENERGY COMPANY, a Colorado General Partnership; Meridian Oil, Inc., a Delaware Corporation, Appellees, v. UNITED STATES FOREST SERVICE, an agency of the United States Department of Agriculture; Samuel P. Redfren, in his official capacity as District Ranger for the Medora Ranger District, North Dakota, Appellants. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
John T. Stahr, Washington, DC, argued (Robert L. Klarquist, Michael W. Reed, James B. Snow, Jeffrey D. Eisenberg, Christine Everett and Alan J. Campbell, on the brief), for appellants.
Charles L. Kaiser, Denver, CO, argued (Anthony J. Shaheen, John Morrison and Brian R. Bjella, on the brief), for appellees.
Before WOLLMAN, Circuit Judge, JOHN R. GIBSON, Senior Circuit Judge, and HANSEN, Circuit Judge.
The United States Forest Service and its district ranger for the Medora Ranger District, North Dakota, appeal from the district court's entry of summary judgment granting declaratory relief to Meridian Oil, Inc. and Duncan Energy Company, an owner and developer of mineral rights. The district court allowed Duncan to proceed with mineral exploration on land in a national forest without Forest Service approval of the surface use plan. We reverse.
Meridian owns mineral rights on land within the Little Missouri National Grasslands area, which is part of the Custer National Forest in North Dakota. The United States owns the surface estate. 1 Duncan has an exploration agreement with Meridian.
Since 1984, Meridian and its predecessor, Milestone Petroleum, have explored for oil and gas within the Custer National Forest without incident. Meridian submitted surface use plans to the Forest Service for review and obtained special use letters of authorization before developing its mineral estates. The Forest Service Regional Office reviews surface use plans by applying the standards and guidelines set forth in the Custer National Forest Land and Resource Management Plan. The Forest Service surveys resources in the area of proposed operations, analyzes potential effects, and determines whether there may be reasonable alternatives and mitigation measures. Following this review, the Forest Service issues a letter of authorization which establishes conditions and protective measures for surface use.
In 1984, the United States Forest Service and Meridian's predecessor, Milestone Petroleum, entered into a Memorandum of Understanding, which provided that the Forest Service would process a surface use plan within ten working days of the receipt of the complete surface use plan. Since 1984, Meridian has submitted fifteen surface plans to the Forest Service before drilling; the Forest Service has processed only two of the plans in fewer than ten days.
On October 15, 1992, the Forest Service and Duncan met to discuss well location, access, and road specifications for Duncan's anticipated drilling. The Forest Service suggested a different access route from that proposed by Duncan, and the access road was staked as the Forest Service suggested. On October 22, the Forest Service and several of Duncan's contractors met for an on-site surface inspection of the well location and staked access route. On December 7, 1992, Duncan submitted a surface use plan for a well site. The Forest Service advised Duncan's contractor that the surface use plan contained an inaccurate map of the proposed access route based on the October 22 meeting, and Duncan submitted a corrected map on December 24, 1992. The Forest Service then conducted an environmental analysis of the well and access route, consisting of a review of reports submitted by Duncan's contractors and consultation with the United States Fish and Wildlife Service and the North Dakota Department of Fish and Game. The Forest Service began to prepare an analysis document, which sets forth terms and conditions for the use of the federal surface.
Over the next two months, Duncan contacted the Forest Service to check the status of the Forest Service's authorization. Duncan wanted to begin drilling, as its contract with Meridian required it to drill seven wells within one year or incur liquidated damages. During this time, Duncan learned that the Forest Service believed that the Memorandum of Understanding did not apply and that the Forest Service was considering whether the more extensive National Environmental Policy Act procedures applied. Under NEPA, Duncan could not drill until the Forest Service completed an area-wide environmental impact study and a site-specific environmental impact statement, which might take two to three years. See 42 U.S.C. Sec. 4332(2)(C) (1988). 2
On March 4, 1993, Duncan sent a letter to the Forest Service stating that it had an absolute right to access and drill the site. Duncan requested that the Forest Service immediately issue a special use permit and comply with the 1984 Memorandum of Understanding. Duncan threatened to access the well as originally proposed if the Forest Service did not immediately approve the staked route. On March 16, 1993, Duncan submitted a revised map for the access route to the Forest Service. Because the new route varied two-tenths of a mile from the staked route, the Forest Service informed Duncan that it must complete the necessary environmental surveys for the new road, but that it would complete its analysis of the original route by the following week.
On Friday, March 19, 1993, at 4 o'clock p.m. Duncan telephoned the Forest Service to say that it would begin constructing the new road the next morning. The Forest Service visited the site the next morning and found that Duncan had begun constructing the road. Duncan completed all road construction by March 27. On April 6, 1993, Duncan placed the drill rig on the site, over the Forest Service's written objection. After Duncan asserted that the Forest Service was bound by the ten-day period stated in the Memorandum of Understanding, the Forest Service formally terminated the Memorandum on April 15, 1993.
Meanwhile, on March 29, 1993, Duncan filed suit against the Forest Service seeking a declaratory judgment that the Service could not prohibit access to or regulate the exploration and development of the privately owned oil and gas estate. The Forest Service filed an answer and a counterclaim asserting that Duncan had improperly used federal surface without obtaining the necessary authorization. The Forest Service requested a permanent injunction barring Duncan from further ground disturbing activity at the well site and on other National Forest System lands without the Forest Service's express written authorization.
After first determining that a justiciable controversy existed because the Forest Service sought a permanent injunction prohibiting Duncan from further work, the district court granted summary judgment to Duncan and Meridian. Duncan Energy Co. v. United States Forest Service, No. A1-93-033, slip op. at 3, 6, 1993 WL 664644 (D.N.D. Sept. 30, 1993). The district court reasoned that the mineral estate is the dominant estate and that the surface estate was therefore subservient to the development, mining, and extraction of the minerals. Id. at 3. The court held that when the United States owns only the surface estate, it does not have the authority to regulate mineral estate exploration, development, mining or extraction different from or greater than state law. Id. at 6. The court stated that the surface owner "cannot prevent the exploration, mining or extraction of the underlying minerals even if that development will completely destroy the value of the surface estate or render it unsuitable for public usage." Id. at 3. The court determined that if the mineral estate holder causes damage to the surface estate, the mineral estate holder is liable in damages to the surface owner, and, if this remedy is "illusory," then the damage can only be righted by condemnation and purchase of the mineral estate. Id. at 3-4. After considering North Dakota law, the court concluded that an attempt to prohibit the development of mineral interests would constitute an inverse condemnation of the mineral estate. Id. at 4. The court rejected the Forest Service's argument that the Forest Service, as owner of the surface estate, had the power to adopt rules, regulations and permit requirements before allowing ground disturbing activity. Id. at 4-5.
The Forest Service appeals, arguing that the district court's decision is incorrect because the Forest Service has authority under North Dakota law and federal law to regulate federally-owned surface lands. The Forest Service acknowledges that the mineral estate is dominant, but points out that it is not seeking to deny access to the underlying non-federal lands, but only to protect federal lands during their use by the mineral holder.
Duncan responds that the district court's decision is consistent with the recognized difference between outstanding mineral rights and reserved mineral rights. 3 Duncan states that this case involves outstanding mineral rights, and, consistent with long-standing law and Forest Service practice, outstanding mineral rights are not subject to the Forest Service's special use permit regulations. Duncan explains that the Forest Service and outstanding mineral rights owners have long conducted mineral activities under the "Negotiation/State Law Paradigm," under which the Forest Service negotiates with outstanding mineral rights holders and utilizes state law to regulate the surface use of federal lands, not the "Full Regulatory Paradigm," found in the special use permit regulations. We do not find these semantic pigeon holes to accurately reflect the complexity of the issues before us. Duncan argues that the Forest Service cannot deviate from established agency precedent and now require...
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