Texas Oil & Gas Corp. v. Andrus

• Decision Date: 26 September 1980
• Docket Number: Civ. A. No. 79-2976.
• Citation: 498 F. Supp. 668
• Court: U.S. District Court — District of Columbia
• Parties: TEXAS OIL & GAS CORP., Plaintiff, v. Cecil ANDRUS, Defendant.

498 F. Supp. 668

TEXAS OIL & GAS CORP., Plaintiff, v. Cecil ANDRUS, Defendant.

Civ. A. No. 79-2976.

United States District Court, District of Columbia.

September 25, 1980.

As Amended September 26, 1980.

Jason R. Warran, James W. McDade, Washington, D. C., Bradley D. Jesson, Ft. Smith, Ark., Craig R. Carver, Denver, Colo., for plaintiff.

Andrew F. Walch, Lands Div., Dept. of Justice, Washington, D. C., for defendant.

MEMORANDUM OPINION

JOYCE HENS GREEN, District Judge.

Presented by the parties' pending cross-motions for summary judgment are the questions of the validity of the November 1, 1979, action of defendant Cecil D. Andrus, Secretary of the United States Department of the Interior, in canceling certain oil and gas leases issued on a noncompetitive basis to plaintiff Texas Oil & Gas Corporation for lands located on the military reservation of Fort Chaffee, Arkansas, and, if such cancellation were improper, the validity of the Secretary's September 20, 1979, decree that delayed indefinitely the issuance to plaintiff of the permits required to begin drilling for oil and gas on the land at Fort Chaffee. Only the former issue need be addressed, however, since a thorough review of the record in this action not only reveals that there are no material facts at issue, but also compels the conclusion that the Secretary's action invalidating the leases was not improper. Accordingly, defendant's motion for summary judgment will be granted and judgment entered in his favor and against the plaintiff.

Because of their importance in the resolution of the issues presented, initial explanation of the statutory and regulatory schemes under which oil and gas leases are issued is required.

The lease agreements in question in this litigation involved approximately 40,000 acres of federal property classified as "acquired" lands, that is, lands which are acquired by the United States through purchase or other transfer from a state or private individual, usually for dedication to a particular use. In contrast to such acquired lands are "public domain" lands, which are owned by the United States by virtue of its sovereignty. The distinction between these types of federal real estate is important in that, as a matter of historical perspective, it was the basis for the evolution of the present statutory scheme through which the Congress has delegated responsibility to the Secretary of the Interior for the leasing of federal lands for mineral development.

The authority of the Secretary to administer the grants of mineral rights on public domain lands has been recognized by Congress since the middle of the last century, see, e. g., Act of July 26, 1866, ch. 262, 14 Stat. 251 (currently codified as amended at scattered sections of 30, 43 U.S.C.); Act of May 10, 1872, ch. 152, 17 Stat. 91 (currently codified as amended at 30 U.S.C. § 21 et seq.), although it was not until 1920 that Congress began to authorize the present system of leasing such lands for oil and gas exploration and production by the Secretary, Mineral Leasing Act of 1920, Pub.L. No.146, ch. 85, 41 Stat. 437 (1920) (currently codified as amended at 30 U.S.C. § 181 et seq.). Acquired lands had been leased on an ad hoc basis for some time, but it was not until 1947 that legislation was passed specifically giving the Secretary authority to lease such property. Mineral Leasing Act for Acquired Lands, Pub.L. No. 382, ch. 513, 61 Stat. 913 (currently codified as amended at 30 U.S.C. § 351 et seq.).

Of the provisions of that enactment providing for the leasing of acquired lands, most pertinent to this case is its language, found in section 352 of title 30 of the United States Code, denoting which acquired lands are subject to lease. As originally passed, it provided:

All deposits of ... oil and gas ... which are owned or may hereafter be acquired by the United States and which are within the lands acquired by the United States (exclusive of such deposits in such acquired lands as are (a) situated within incorporated cities, towns and villages, national parks and monuments, (b) set apart for military or naval purposes, or (c) tidelands or submerged lands) may be leased by the Secretary of the Interior under the same conditions as contained in the leasing provisions of the mineral leasing laws, subject to the provisions hereof. ... No mineral deposit covered by this section shall be leased except with consent of the head of the executive department ... having jurisdiction over the lands containing such deposit ....

30 U.S.C. § 352 (1970) (emphasis supplied). This congressional mandate that acquired lands set aside for military purposes be excluded from those acquired properties that could be leased was continued until 1976 when section 352 was amended to delete that exemption. Federal Coal Leasing Amendments Act of 1975, Pub.L. No. 94-377, § 12, 90 Stat. 1090 (1976), codified at 30 U.S.C. § 352 (1976). That amendment precipitated the circumstances that have culminated in this litigation.

On May 9, 1977, some nine months after the effective date of the amendment to section 352, plaintiff Texas Oil & Gas filed applications for thirty-eight noncompetitive oil and gas leases on an area of 78,962.73 acres within the boundaries of Fort Chaffee, Arkansas.¹ These offers were the first noncompetitive applications to lease these federal acquired lands set aside for military purposes following the 1976 amendment.

Not long after the congressional change in section 352 in 1976, action was taken by the Department of Defense and the Department of the Interior, the agencies most directly involved, to amend their applicable regulations. A little over one month after the lease applications were filed by Texas Oil & Gas, the Corps of Engineers, despite the recent revision of section 352 enacted in the Federal Coal Leasing Amendments Act, published proposed regulations that would have continued its past prohibition on leasing acquired lands set aside for military purposes for oil and gas exploration and production. 42 Fed.Reg. 31036 (1977). On September 16, 1977, the Department of the Interior responded to the amendment to section 352 by publishing a proposed change in its regulation concerning acquired lands, 43 C.F.R. § 3101.2-1. As it was in effect at the time of the passage of the Federal Coal Leasing Amendments Act, that regulation declared in pertinent part:

§ 3101.2-1 Acquired Lands to which the Act does not apply.

* * * * * *

(f) Set apart for military or naval purposes, including lands within naval petroleum and oil shale reserves ....

43 C.F.R. § 3101.2-1(f) (1977). The regulation proposed by the Department of the Interior was to amend subsection (f) to modify its reference to all acquired lands set aside for military purposes so as to include only those "within naval petroleum and oil shale reserves and within the National Petroleum Reserve in Alaska." 42 Fed.Reg. 46558 (1977). It was also stated in the Federal Register notice accompanying the proposed rule change:

The regulatory prohibition reflecting the old statutory provision remains in effect, serving as an exercise of the Secretary's new authority to lease or not to lease such deposits. This proposal would remove the regulatory prohibition and open these lands for mineral leasing under the same terms and conditions as apply to other acquired lands ....

Id.

Comments on their proposed regulations were requested and received by both the Corps of Engineers and the Department of the Interior, which included comments by plaintiff concerning the proposed change in section 3101.2-1. On July 10, 1978, the final rules of the Corps of Engineers and the Department of Defense were published in which it was indicated that the Corps of Engineers was willing to consider leasing of acquired military lands so long as it did not impair "the adequate utilization of the lands for the primary purposes for which they have been acquired or are being administered." 43 Fed.Reg. 29752 (1978), codified at 32 C.F.R. § 643.35(a)(1) (1980). As to the Interior Department's proposed change in 43 C.F.R. § 3101.2-1, a final rule adopting the amendment to subsection (f) was published on August 22, 1978, to be effective September 21, 1978. 43 Fed.Reg. 37202 (1978). In the department's comments on the rule, it was indicated that together the Department of Defense and the Department of the Interior would "determine the suitability of the land for mineral leasing and development on a case by case or area by area basis before the Secretary of the Interior issues a lease." Id.

With regard to the validity of the plaintiff's lease applications, because they were filed before the effective date of the Interior Department's regulation concerning leasing of acquired lands used for military purposes, some uncertainty existed in the department about their validity, as a series of documents filed by the parties indicate. Submitted to the Court is a copy of a letter, the original of which was submitted to the Department of Defense by Amoco Production Company as a comment to the department's proposed rule prohibiting the leasing of acquired lands used for military purposes. In that letter it is explained how Amoco Production, like Texas Oil & Gas, had filed lease applications just after the amendment to section 352. On the copy of the letter is a handwritten note signed by an attorney of the Department of Interior assigned to the drafting and comment-analyzing of the regulatory change proposed for section 3101.2-1, which states:

Dave, have you seen this? These offers are premature and probably should be rejected under Section 2091, but we'd better give some thought to whether we'll have a simo period or an over-the-counter crunch when the final rule is effective. Larry McBride x4803.

Exhibit C to Plaintiff's Motion for Summary Judgment (filed Jan. 18, 1980). 43 C.F.R. § 2091 referred to in the note, the applicability of which is contested by the parties,...