Phillips Petroleum Co. v. Lujan
| Decision Date | 13 May 1992 |
| Docket Number | Nos. 91-5071,91-5072,s. 91-5071 |
| Citation | 963 F.2d 1380 |
| Parties | PHILLIPS PETROLEUM COMPANY, a Corporation, Plaintiff-Appellant, v. Manuel LUJAN, Jr., Secretary, Department of the Interior, Robert Kallman, Director, or Acting Director, Mineral Management Service, Department of the Interior, Kenneth M. Moyers, Chief, Royalty Compliance Division, Nick L. Kelly, Area Manager, Dallas Regional Compliance Office, Minerals Management Service, United States Department of the Interior, the Mineral Management Service, Defendants-Appellees. ATLANTIC RICHFIELD COMPANY, Plaintiff-Appellant, v. Manuel LUJAN, Jr., Secretary, Department of the Interior, Robert Kallman, Director, or Acting Director, Mineral Management Service, Department of the Interior, Kenneth M. Moyers, Chief, Royalty Compliance Division, Nick L. Kelly, Area Manager, Dallas Regional Compliance Office, Minerals Management Service, United States Department of the Interior, the Mineral Management Service, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Thomas L. Cubbage, II, Phillips Petroleum Co., Bartlesville, Okl. (L.K. Smith and Paul E. Swain, III, Tulsa, Okl., Jennifer G. Fry, Phillips Petroleum Co., Bartlesville, Okl., and Boone, Smith, Davis, Hurst & Dickman, Tulsa, Okl., of counsel, with him on the briefs), for plaintiff-appellant Phillips Petroleum Co.
J. Berry St. John, Jr. and Deborah Bahn Price, of Liskow & Lewis, New Orleans, La., and Joseph W. Morris and David L. Bryant, of Gable & Gotwals, Tulsa, Okl., on the briefs, for plaintiff-appellant Atlantic Richfield Co.
Robert L. Klarquist, Dept. of Justice, Environment & Natural Resources Div., Washington, D.C. (Barry M. Hartman, Acting Asst. Atty. Gen., Kathleen Bliss Adams, Asst. U.S. Atty., Tulsa, Okl., Lisa K. Hemmer and Edward J. Shawaker, Dept. of Justice, Environment & Natural Resources Div., Washington, D.C., and Peter J. Schaumberg and Geoffrey Heath Before TACHA and EBEL, Circuit Judges, and ROGERS, District Judge. *
Office of the Sol., Dept. of the Interior, Washington, D.C., of counsel, with him on the brief), for defendants-appellees.
In this consolidated appeal, appellant Phillips Petroleum Company (Phillips) and appellant Atlantic Richfield Company (Arco) appeal the district court's order granting defendants' motions for summary judgment. Phillips and Arco contend that defendants failed to properly initiate an audit pursuant to the Federal Oil and Gas Royalty Management Act (FOGRMA), 30 U.S.C. §§ 1701-1757. Phillips further asserts that defendants failed to comply with the Paperwork Reduction Act (PRA), 44 U.S.C. §§ 3501-3520. Arco also argues that two of defendants' requests for documents impose requirements contrary to federal law. We exercise jurisdiction under 28 U.S.C. § 1291 and affirm.
The Department of the Interior (DOI) is responsible for issuing and administering oil and gas leases for federal lands, 30 U.S.C. §§ 181, 223-237, and for approving the issuance of and administration of oil and gas leases for lands allotted to Indians and for tribal lands, 25 U.S.C. §§ 396-396g. The FOGRMA directs the Secretary of the DOI (the Secretary) to establish "a comprehensive inspection, collection and fiscal and production accounting and auditing system to provide the capability to accurately determine oil and gas royalties, interest, fines, penalties, fees, deposits, and other payments owed, and to collect and account for such amounts in a timely manner." 30 U.S.C. § 1711(a). The FOGRMA further provides that the Secretary "shall audit and reconcile, to the extent practicable, all current and past lease accounts for leases of oil or gas and take appropriate actions to make additional collections or refunds as warranted, ... [and] may also audit accounts and records of selected lessees and operators." Id. § 1711(c)(1). The Minerals Management Service (MMS) is the agency within the DOI that is responsible for auditing royalty payments on federal and Indian mineral leases.
Phillips and Arco hold numerous leases on federal and Indian lands. The FOGRMA requires that lessees "establish and maintain any records, make any reports, and provide any information that the Secretary may, by rule, reasonably require for the purposes of implementing" the FOGRMA. 30 U.S.C. § 1713(a). Lessees also must make these "records, reports, or information ... available for inspection and duplication." Id. Section 1713(b) specifies that lessees must maintain these records "for 6 years after the records are generated unless the Secretary notifies the record holder that he has initiated an audit or investigation involving such records and that such records must be maintained for a longer period."
On September 19, 1989, the MMS sent nearly identical letters to Phillips and Arco. The caption on the letters reads, "October 1, 1983, through September 30, 1989, Audit Engagement." The first paragraph of the letters states,
This is to formally notify you that the Minerals Management Service (MMS) is initiating an audit of the propriety of the royalty and other payments made by Phillips Petroleum Company (Phillips) [or Atlantic Richfield Company (Atlantic) ] and any and all of its subsidiary and parent companies as necessary for the period October 1, 1983, through September 30, 1989. Therefore, any and all records related to Federal and Indian mineral leases for this period must be retained and be available for inspection by any duly authorized officer of the Department of the Interior. These records must be maintained until their release is specifically authorized in writing by MMS. Any and all personnel of (Alteration added.) The remainder of the letter provides the statutory and regulatory authority upon which the MMS based its initiation of the audit, explains that the Dallas Area Compliance office would coordinate the audit, and explains how the MMS and appellants would communicate.
the State and Tribal audit organizations that have audit agreements or delegations with MMS are also duly authorized officers of the Secretary of the Interior (Secretary).
The MMS subsequently submitted document requests regarding specific leases to both Phillips and Arco. Two of these document requests sent to Arco are at issue on this appeal. On November 3, 1989, the MMS submitted Request No. 89-23 to Arco. The handwritten Request identified, by an attachment, a list of sample leases that the MMS had selected to audit. After giving an approximate completion date for the audits, the Request stated the following:
MMS is requesting that ARCO provide by 11-17-89 any known overpayments that do exist on the offshore properties. This should include those overpayments identified through audits performed by ARCO, or overpayments (refunds) not processed by the Royalty Reporting Unit because of the 2-year statute of limitations.
MMS is also requesting by 11-17-89 that ARCO provide a list of leases that have been audited by Internal Audit, Regulatory and Compliance or some group within ARCO; leases to be audited in the next three years; the results of the audit.
On April 27, 1990, the MMS submitted Request No. 90.A to Arco. This Request directed Arco to provide "all records and documents, in whatever form, which address or reflect the accounting or reporting of production, sales, revenues, costs and royalties associated with" thirty-eight different leases.
On October 23, 1989, Phillips filed a complaint in the United States District Court for the Northern District of Oklahoma requesting that the court enter a declaratory judgment that the DOI, the Secretary, and the MMS must initiate audits, as well as file claims for royalty underpayments, within six years after royalty payments are made; that the MMS' September 19, 1989 letter was unenforceable or arbitrary and capricious; that the DOI must request the production of specific documents pertaining to specific leases in order to commence an audit; that the MMS' document requests violated the Paper Reduction Act; and that, as a result, Phillips was not required to maintain its records as directed by the September 19, 1989 letter.
On December 18, 1989, Arco filed a complaint in the same district court requesting that the court provide declaratory relief by setting aside the requirements contained in the September 19, 1989 letter and Request No. 89-23 "to the extent they require [Arco] to retain documents for periods longer than six years after the documents were generated, without identifying any particular documents that the DOI intends to audit and without any audit being underway." The complaint also stated that Request No. 89-23 was invalid to the extent it requires Arco "to generate new documents relating to overpayments and internal audits." On June 25, 1990, Arco filed a First Supplemental Complaint alleging, among other things, that Request No. 90.A was invalid because "defendants do not intend to review the documents required to be produced by Request No. 90.A upon receipt of those documents, nor do they have the auditing capability to do so."
Appellees moved for summary judgment with respect to Phillips' complaint. After the district court consolidated the two cases, appellees then moved for summary judgment with respect to Arco's claims. Phillips and Arco each filed cross motions for summary judgment. On January 2, 1991, the district court granted appellees' motion for summary judgment. The court held that the MMS' September 19, 1989 letter did not violate the FOGRMA because "30 U.S.C. § 1713(b) does not state a particular described lease or leases must be the subject of the directive to extend the six-year maintenance of records"; that the On January 16, 1991, Arco filed a motion pursuant to Fed.R.Civ.Proc. 59(e) seeking to alter or amend the judgment to clarify whether the district court's January 2, 1991 order disposed of all of Arco's claims in the original complaint and in the First Supplemental Complaint. In an...
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