963 F.2d 1380 (10th Cir. 1992), 91-5071, Phillips Petroleum Co. v. Lujan

Docket Nº:91-5071, 91-5072.
Citation:963 F.2d 1380
Party Name: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, Mine
Case Date:May 13, 1992
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit
 
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Page 1380

963 F.2d 1380 (10th Cir. 1992)

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.

Nos. 91-5071, 91-5072.

United States Court of Appeals, Tenth Circuit

May 13, 1992

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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,

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Office of the Sol., Dept. of the Interior, Washington, D.C., of counsel, with him on the brief), for defendants-appellees.

Before TACHA and EBEL, Circuit Judges, and ROGERS, District Judge. [*]

TACHA, Circuit Judge.

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.

BACKGROUND

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

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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).

(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 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...

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