Conoco, Inc. v. Hodel

Decision Date14 January 1986
Docket NumberCiv. A. No. 85-277 MMS.
Citation626 F. Supp. 287
PartiesCONOCO, INC. and Consolidation Coal Company, Plaintiffs, v. Donald P. HODEL, Secretary of the Interior and United States Department of the Interior, Defendants.
CourtU.S. District Court — District of Delaware

Andrew B. Kirkpatrick, Jr., and Richard D. Allen, of Morris, Nichols, Arsht & Tunnell, Wilmington, Del.; of counsel: Richard McMillan, Jr., Steven P. Quarles, and Peter K. Levine of Crowell & Moring, Washington, D.C., for plaintiffs.

William C. Carpenter, Jr., U.S. Atty., and Richard G. Andrews, Asst. U.S. Atty., Wilmington, Del.; Alan Brenner, Dept. of Justice, Washington, D.C., for defendants.

OPINION

MURRAY M. SCHWARTZ, Chief Judge.

Plaintiffs Conoco, Inc. ("Conoco") and Consolidated Coal Company ("Consolidated") seek declaratory relief to prevent defendant the Secretary of the Interior ("the Secretary") from applying Section 2 of the Mineral Lands Leasing Act ("MLLA"), codified as amended at 30 U.S.C. § 201(a)(2)(A) (1982), to federal leases of minerals other than coal.

The matter is before this Court on cross-motions for summary judgment. For the reasons explained below, the Court will deny plaintiffs' motion and will grant defendant's motion for summary judgment.

Facts

Under the authority of the Mineral Lands Leasing Act of 1920 ("MLLA"), 30 U.S.C. § 181 et seq. (1982), the Secretary of the Interior leases federal lands containing certain types of mineral deposits. Sub-chapter I of the MLLA contains generally applicable mineral leasing provisions; subchapters II, III, IV, V, VII, VIII, and IX cover the leasing of coal, phosphates, oil and gas, oil shale, sodium, sulphur, and potash, respectively.

In 1976 Congress enacted the Federal Coal Leasing Amendments Act ("the FCLAA"). Section 3 of the FCLAA amended subchapter II of the MLLA and established additional requirements for the issuance of new federal coal leases.1 One of the purposes of the FCLAA was to promote the "diligent development" of federal coal leases. See 30 U.S.C. §§ 202a(2), (3); H.R.Rep. No. 681, 94th Cong., 2d Sess. 9-13 (1976), reprinted in 1976 U.S.Code Cong. & Ad.News pp. 1943, 1945-48. To achieve that goal, Section 2 of the MLLA as amended penalizes companies that have held a federal coal lease for more than ten years from the effective date of the statute, August 4, 1976, without producing coal therefrom in commercial quantities.2

Under the Secretary's interpretation of Section 2, any holder of federal coal leases acquired prior to August 4, 1976 who fails adequately to develop those leases by August 4, 19863 is precluded from acquiring new federal leases for coal and for every other mineral covered by the MLLA. Companies "controlled by or under common control with" such a holder ("associated companies") are similarly precluded. See 30 U.S.C. § 201(a)(2)(A). Under the final guidelines issued by the Secretary, "a subsidiary's violation of Section 2 is charged to a controlling parent...." 50 Fed.Reg. 35144 (Aug. 29, 1985).

Conoco is an energy company incorporated in Delaware with its principal place of business in Houston, Texas. Conoco engages in the exploration, production, refining, and marketing of oil and gas products, and derives substantial revenue from its holdings of federal onshore oil and gas leases. Consolidated, a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania, is a wholly owned subsidiary of Conoco and a major coal producer and marketer.

Consolidated holds thirty undeveloped federal coal leases issued prior to 1976 which contain an estimated 1.3 billion tons of recoverable coal. To avoid the penalty of Section 2(a)(2)(A), Consolidated must have these properties in production by August 4, 1986. Consolidated asserts it cannot produce coal from these leaseholds in commercial quantities by that date. For purposes of this litigation, Consolidated does not dispute that it will not be permitted to require additional federal coal leases after August 4, 1986.4 Complaint at ¶ 22.

At present, twenty percent of Conoco's total oil and gas leases, encompassing some one and one-half million acres, are held in federal onshore leases. In addition, Conoco adds over 10,000 leases to its inventory per year. Between 1981 and 1985, Conoco annually acquired federal onshore oil and gas leases ranging from 48,000 to 365,000 acres. If Consolidated continues to hold its nonproducing pre-1976 federal coal leases after December 4, 1986,5 Conoco, as the parent of Consolidated, will be required to forgo the opportunity to obtain new federal oil and gas leases. Conversely, if Consolidated divests itself of the pre-1976 leases in order to allow Conoco to continue to acquire new federal oil and gas leases, it alleges the divestiture, even if feasible, "would result in substantial financial losses." Id. ¶ 23.

Plaintiffs assert the Secretary has wrongfully interpreted the federal lease-exclusion provisions of Section 2(a)(2)(A) of the MLLA by extending it to companies such as Conoco which are affiliated with companies holding federal coal leases, but which themselves own no coal leases and seek only non-coal federal mineral leases. Further, plaintiffs charge that in February, 1985, the Secretary suddenly changed his longstanding interpretation that the Section 2(a)(2)(A) prohibition applied only to coal leases.

Plaintiffs seek a declaration from this Court that the Secretary's interpretation is arbitrary and capricious, an abuse of discretion, beyond the Secretary's authority and contrary to law, and that the prohibition of Section 2(a)(2)(A) of the MLLA applies to federal coal leases only. Conoco also seeks a declaratory judgment that the Secretary shall allow it to apply for federal non-coal leases without regard to the status of Consolidated's pre-1976 federal coal leases.6

The Secretary denies his statutory interpretation of Section 2(a)(2)(A) to include federal non-coal leases is either new or erroneous. The Secretary claims the plain language of the statute and the legislative history negate the plaintiff's interpretation and that the Department's interpretation has been consistent since the statute was enacted.

Analysis
1. Statutory Language

In all cases involving statutory construction, a court's starting point must be the language employed by Congress. See, e.g., North Dakota v. United States, 460 U.S. 300, 311, 103 S.Ct. 1095, 1102, 75 L.Ed.2d 77 (1983). The ordinary presumption is that the words of the statute are conclusive evidence of the legislative purpose. See, e.g., Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982).

Section 3 of the Federal Coal Leasing Amendment Act of 1975 amended the last sentence of Section 2(a) of the Mineral Lands Leasing Act (30 U.S.C. § 201(a)) to read:

The Secretary shall not issue a lease or leases under the terms of this Act7 to any person, association, corporation, or any subsidiary, affiliate, or persons controlled by or under common control with such person, association, or corporation, where any such entity holds a lease or leases issued by the United States to coal deposits and has held such lease or leases issued for a period of ten years when such entity is not, except as provided for in section 7(b) of this Act,8 producing coal from the lease deposits in commercial quantities. In computing the ten-year period referred to in the preceding sentence, periods of time prior to the date of enactment shall not be counted.

Pub.L. No. 94-377, § 3 (1976), codified at 30 U.S.C. § 201(a)(2)(A) (1982) (emphasis added).

Plaintiffs urge the opening portion of the first sentence of Section 2, reading "The Secretary shall not issue a lease or leases under the terms of this Act...." means "The Secretary shall not issue a coal lease or leases under the terms of this Act...." Plaintiffs buttress their position by noting that the word "lease" as used in the remainder of the sentence refers to "coal lease," and therefore when "lease" is first used in the sentence it must also refer to coal lease. Plaintiffs go on to point out that the words "lease," "leases," "leasing," and "lessee" are used over one hundred times in the rest of the FCLAA. Only fifty-five times are these words accompanied by the word "coal" in the same sentence, and twenty-eight times the word "coal" does not even appear in the same paragraph. Plaintiffs argue that this consistent usage establishes a "common usage" of the word "lease" to mean "coal lease" throughout the FCLAA.9

It is true that the words "lease," "leases," "leasing," and "lessee" as used in the FCLAA generally refer to coal leases. This does not mean the first use of the word "lease" in Section 3 also means "coal lease."

Plaintiffs focus unduly on the word "a lease or leases" in the first sentence. A word in a statute cannot be construed in isolation. The sentence reads: "... a lease or leases under the terms of this Act...." Plaintiffs would have the Court ignore the phrase "under the terms of this Act," arguing that it is "immaterial" whether "this Act" refers to the FCLAA or the MLLA.

A statute cannot be read so as to render certain words nugatory. See, e.g., United States v. Johnson; 462 F.2d 423, 428 (3d Cir.1972), cert. denied, 410 U.S. 937, 93 S.Ct. 1396, 35 L.Ed.2d 602 (1983). Plainly the words "under the terms of this Act" modify the word "a lease or leases." The question then becomes, to which Act, the FCLAA or the MLLA, do the words "this Act" refer?

If "this Act" refers to the FCLAA, then Congress was referring only to federal coal leases, for the FCLAA deals with coal leases. If "this Act" refers to the MLLA, however, then Congress was referring to all federal mineral leases since the MLLA grants the Secretary authority to lease deposits of coal, phosphate, sodium, potassium, oil, gas, oil shale, and gilsonite on federal lands.

Read in context "this Act" refers to the MLLA and not the FCLAA. First, Cong...

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