Copper Valley Mach. Works, Inc. v. Andrus, 79-1994
| Decision Date | 23 April 1981 |
| Docket Number | No. 79-1994,79-1994 |
| Citation | 653 F.2d 595 |
| Parties | COPPER VALLEY MACHINE WORKS, INC., Appellant, v. Cecil D. ANDRUS, Secretary of the Department of Interior, et al. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Everard A. Marseglia, Jr., Washington, D. C., for appellant; A. Karen Hill, Washington, D. C., was on the brief, for appellant.
Jerry Jackson, Atty., Dept. of Justice, Washington, D. C., with whom James W. Moorman, Asst. Atty. Gen., Lawrence R. Liebesman and Edward J. Shawaker, Attys., Dept. of Justice, Washington, D. C., were on the brief, for appellees.
Before TAMM and MacKINNON, Circuit Judges and PRATT *, United States District Judge for the District of Columbia.
Opinion for the Court filed by Circuit Judge MacKINNON.
The principal issue in this appeal is whether a restriction in a drilling permit prohibiting summer drilling in the interest of conservation worked a "suspension of operations and production" that would extend the life of an oil and gas lease under section 39 of the Mineral Leasing Act of 1920, as amended, 30 U.S.C. § 209.
Effective February 1, 1966, the Secretary of Interior issued oil and gas lease A-063937 to run for an initial "period of ten years and so long thereafter as oil or gas is produced in paying quantities." (Appellant's Exhibit (App.Ex.) A at 3.)
Near the end of the primary lease term, Copper Valley Machine Works, Inc. (Copper Valley), the designated operator of the lease, 1 asked the Oil and Gas Supervisor of the United States Geological Survey about "extending the 10-year lease term by drilling across the expiration date." 2 Subsequently Copper Valley filed for the Supervisor's consideration an application for a permit to drill. On January 30, 1976 the drilling permit application was approved,
subject to conditions attached to the permit and conditions and requirements described below:
10. The approved application and development plan provides for operation during the winter season only, as approved by the appropriate surface managing agency.
(App.Ex. F at 2) (emphasis added). This "winter season only" restriction was considered "necessary because the lease itself was issued without any stipulations for protection of the tundra/perma-frost environment during the months of summer thaw." (App.Ex. V at 3.)
The events that then led to this dispute are described in a memorandum from the Acting Director of the Geological Survey to the Secretary of Interior:
The well was commenced on January 31, 1976 (the expiration date of the primary term), and reached a depth of 100 feet before having to shutdown for the 1976 summer season. Following the summer shutdown from May to November 1976, operations were recommenced on February 5, 1977, and after reaching a depth of 1,070 feet on March 20, 1977, electric logs were run in the well. After evaluating the electric logs and examining the samples, the Supervisor concluded that the operator had satisfied the "diligent drilling" requirements of 43 CFR 3107.2-3, 3 and recommended to BLM that the lease be extended to January 31, 1978.
After the 1977 summer shutdown, the Supervisor advised the operator and the lessee that the lease would expire January 31, 1978, absent a well physically and mechanically capable of production in paying quantities by that date.
On January 20, 1978, the operator wrote the Supervisor and requested that the lease be extended for twelve (12) months to compensate for the two periods of summer shutdown in 1976 and 1977. The Supervisor considered this letter to be an application to the Secretary for an extension of lease Anchorage 063937 pursuant to 43 CFR 3103.3-8 4 (Emphasis added.)
Although acknowledging that Copper Valley had been "unable to conduct operations on a full-time basis since January of 1976 by the imposition of the requirement that operations would be permitted only during the winter months," (App.Ex. V at 4), the Acting Director recommended that no extension of the lease be granted or recognized.
On May 22, 1978, the Secretary of Interior followed the Acting Director's recommendation, ruling that
the lease is considered to have expired by operation of law as of midnight, January 31, 1978, absent the existence of a well on that date which had been determined by the Supervisor as capable of producing in paying quantities. The reasons for the denial (of extension) are that (1) the lessee accepted the imposed restriction that drilling could be conducted only during the winter season without complaint until 11 days preceding the lease expiration date and (2) the 2-year lease extension earned by drilling across the end of the primary term of January 31, 1976, afforded sufficient additional time, despite the restriction, in which to have completed a well that was physically capable of production in paying quantities.
Memorandum from Acting Chief, Conservation Division to Conservation Manager, Western Region (June 14, 1978), reprinted in App.Ex. V at 1.
On July 17, 1978, Copper Valley was advised of the Secretary's May 22nd action, and on August 18 sought a declaratory judgment in the United States District Court for the District of Columbia that the Secretary's refusal to permit another 12 months of operations was unlawful. Copper Valley relied on section 39 of the Mineral Leasing Act of 1920, as amended, which provides in part:
In the event the Secretary of Interior in the interest of conservation, shall direct ... the suspension of operations and production under any lease granted under the terms of this Act, any payment of acreage rental or of minimum royalty prescribed by such lease likewise shall be suspended during such period of suspension or operations and productions; and the term of such lease shall be extended by adding any such suspension ... thereto.
30 U.S.C. § 209 (emphasis added). 5
On the parties' cross-motions for summary judgment, the district court ruled in favor of the Secretary. Copper Valley Machine Works, Inc. v. Andrus, 474 F.Supp. 189 (D.D.C.1979). The court reasoned that drilling permit restrictions, which the lessee had agreed to accept in signing the lease, did not amount to a "suspension of operations and production" because Congress meant to apply that phrase only to
extraordinary situations where the Secretary orders the suspension of drilling to the surprise of the lessee in order to conserve oil and gas or where the lessee requested and the Secretary assented to a suspension. See H.R.Rep. No. (1737, 72d Cong., 1st Sess. 3 (1932)) and 76 Cong.Rec. 705 (Dec. 19, 1932).
Id. at 192. The court also indicated that Copper Valley's action was untimely inasmuch as the Secretary's imposition of the "winter season only" restriction in the drilling permit of January 30, 1976 triggered the 90 day period for seeking judicial review of adverse agency action. Id. (citing 30 U.S.C. § 226-2). This appeal followed.
Copper Valley's principal contention on appeal is that the drilling permit's "winter season only" restriction, by preventing drilling operations for 6 summer months a year, worked a "suspension of operations and production" "in the interest of conservation" and therefore, under § 209, mandated an automatic extension of the lease for a period equal to the length of the suspension. The Government responds that the drilling restrictions did not create suspensions within the meaning of § 209.
We note at the outset that there is no contention that the "winter season only" restriction was not ordered "in the interest of conservation." The parties agree that carrying on drilling operations during the summer months would have substantially damaged the permafrost character of the leasehold area. Preventing such damage is obviously in the interest of conservation if that term is to receive its ordinary meaning. While the prevention of environmental damage may not have been the "conservation" that Congress principally had in mind in 1933 when it passed § 209, 6 suspending operations to avoid environmental harm is definitely a suspension in the interest of conservation in the ordinary sense of the word. 7 And there was no indication that Congress intended that "conservation" be given any interpretation other than its ordinary meaning. 8
The Secretary asserts that § 209 "was designed by Congress to cover only unanticipated interruptions of drilling." Appellee's Brief at 13. Under this view, whether a § 209 suspension has occurred depends on whether the "winter season only" restriction was a surprise to Copper Valley. It is in this context that the Secretary emphasizes that the lease gave "notice that drilling activities would be subject to restriction," that Copper Valley "did not protest against the restriction until two years after the permit was issued," and that Copper Valley "continued to pay rent during the thaw months without attempting to assert that the drilling permit condition was a surprise." Id. We find it unnecessary to consider whether summary judgment was appropriate on the question whether Copper Valley could foresee the suspension of drilling, for we reject as unpersuasive the Secretary's attempt to narrow the scope of the plain terms of § 209.
As indicated in note 6 supra, § 209 was enacted in a period when the Secretary was suspending the drilling operations of oil and gas lessees in order to alleviate the problem of excess petroleum production. The congressional report explained that the bill
relieve(s) lessees of coal and oil lands from the necessity of paying prescribed annual acreage rental, during periods when operations or production is suspended, in the interest of conservation,...
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