Amoco Production Co. v. Hodel, 86-4168

• Decision Date: 29 April 1987
• Docket Number: No. 86-4168,86-4168
• Citation: 815 F.2d 352
• Parties: AMOCO PRODUCTION COMPANY, Plaintiff-Appellant, v. Donald P. HODEL, Secretary of Department of the Interior, et al., Defendants- Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 352

815 F.2d 352

AMOCO PRODUCTION COMPANY, Plaintiff-Appellant, v. Donald P. HODEL, Secretary of Department of the Interior, et al., Defendants- Appellees.

No. 86-4168.

United States Court of Appeals Fifth Circuit.

April 29, 1987.

Gene W. Lafitte, George J. Domas, Liskow & Lewis, New Orleans, La., for plaintiff-appellant.

Bruce G. Forrest, Robert S. Greenspan, Leslie K. Dellon, Dept. of Justice, Fed. Programs Branch, Civil Div., Washington, D.C., Milling, Benson, Woodward, Hillyer, Pierson & Miller, Charles D. Marshall, Jr., David N. Schell, Jr., New Orleans, La., for defendants-appellees.

Appeal from the United States District Court for the Western District of Louisiana.

Before BROWN, RANDALL and HIGGINBOTHAM, Circuit Judges.

RANDALL, Circuit Judge:

This case concerns a dispute over the valuation of royalties due the federal government from a gas lease on the Outer Continental Shelf. In the district court, the plaintiff, Amoco Production Company ("Amoco"), having exhausted its administrative remedies, sought declaratory and injunctive relief from a decision of the Interior Board of Land Appeals ("IBLA"), a tribunal of the Department of the Interior ("DOI"), affirming the DOI's assessment of extra royalties and penalties due for gas produced and sold by Amoco from a lease off the Louisiana shore. The government moved to dismiss the case for lack of subject-matter jurisdiction on the ground that Amoco's claim was actually a disguised claim for a money judgment in excess of $10,000 and that therefore, jurisdiction properly lay in the Claims Court under the Tucker Act, 28 U.S.C. Secs. 1346(a)(2) & 1491(a). The district court refused to dismiss, but held for the government on the merits, affirming the result reached by the IBLA while disagreeing with its reasoning. Finding that the district court did not have subject-matter jurisdiction over this case, we vacate the judgment of the district court and remand to the district court with instructions to transfer this action to the Claims Court.

I.

The Outer Continental Shelf Lands Act, 43 U.S.C. Sec. 1331 et seq. ("OCSLA") authorizes the Secretary of the Interior ("Secretary") to grant leases to private individuals or companies for the recovery of oil and gas from the Outer Continental Shelf. See 43 U.S.C. Secs. 1331 & 1337. It requires that leasing activities "be conducted to assure receipt of fair market value for the lands leased and the rights conveyed by the Federal Government." 43 U.S.C. Sec. 1344(a)(4). Pursuant to the OCSLA, the DOI has issued regulations to provide guidance in valuing natural gas.

In December, 1974, the government granted Amoco a lease, OCS-G 2866, to extract oil or natural gas from Block 23 of the Vermilion area, off the coast of Louisiana. The lease provided the government a "royalty of 16- 2/3 percent in amount or value of production saved, removed, or sold from the leased area." Amoco used the gas extracted under the Vermilion lease to meet its obligations under a warranty contract executed with Florida Power and Light Company ("FP & L") nine years earlier. ¹

In 1977, Amoco requested a valuation determination letter from the Minerals Management Service ("MMS") stating how royalties from the lease were to be calculated. The departmental regulation in effect at the time of the disputed valuation required that the value of production for computing royalties be the "estimated reasonable value" of the product. 30 C.F.R. Sec. 250.64 (1977). ² It defined reasonable value as "value computed on the basis of the highest price paid or offered at the time of production in a fair and open market for the major portion of like-quality products produced and sold from the field or area where the leased lands are situated." Id. In 1979, Congress revised 30 C.F.R. Pt. 250. The amended version of 30 C.F.R. Sec. 250.64 specifies "regulated prices" as a factor to be considered in determining the value to be used in the computation of royalties. 44 Fed.Reg. 61903 (1979). ³

The MMS' letter placed a value on gas from the Vermilion lease at a price exceeding $1.50 per thousand cubic feet. This price was determined in accordance with FPC Opinion No. 770-A.1, interpreting 30 C.F.R. Sec. 250.64, which established "just and reasonable" rates applicable to the sale of natural gas in interstate commerce. Under this valuation, the royalty due the government from the lease, $0.25 per thousand cubic feet, was greater than the total amount received by Amoco from FP & L, $0.2125 per thousand cubic feet. Amoco did not appeal the valuation placed on the gas by the MMS.

In 1978, Congress passed the Natural Gas Policy Act ("NGPA"), 15 U.S.C. Sec. 3301 et seq., regulating the price of natural gas. The NGPA became effective on December 1, 1978.

In July, 1982, following an audit, the MMS informed Amoco that Amoco's computation of royalties from the Vermilion lease for February, 1977, through February, 1979, fell $10,424,298.62 short of the royalties due under the 1977 determination letter, largely because Amoco had used its FP & L contract price, instead of the MMS' valuation determination letter, in its computations. The MMS also notified Amoco that it would add late payment charges which amounted to $3,920,015.52.

Amoco paid the assessed royalties and late charges and subsequently appealed both assessments to the MMS. Amoco conceded that it underpaid royalties due the government for gas from the Vermilion lease for the period prior to the NGPA pricing regulations. It asserted, however, that after December 1, 1978, the price of gas from the lease was subject to regulation under Sec. 105 of the NGPA, 15 U.S.C. Sec. 3315. This section states, in relevant part:

(a) Application.--The maximum lawful price computed under subsection (b) of this section shall apply to any first sale of natural gas delivered during any month in the case of natural gas, sold under any existing contract or any successor to an existing contract, which was not committed or dedicated to interstate commerce on November 8, 1978.

(b) Maximum lawful price--

(1) General rule.-- ... [T]he maximum lawful price under this section shall be the lower of--

(A) the price under the terms of the existing contract, to which such natural gas was subject on November 9, 1978, as such contract in effect on such date;

(B) the maximum lawful price, per million Btu's, computed for such month under section 3312 of this title (relating to new natural gas).

15 U.S.C. Sec. 3315 (emphasis added). Amoco argued that the gas it sold from the Vermilion lease to FP & L under its warranty contract was subject to that existing warranty contract. Thus the maximum lawful price that Amoco could charge for the gas was the $0.2125 per thousand cubic feet it was receiving from FP & L on November 9, 1978. Not only did section 105 of the NGPA make the warranty contract price a ceiling price, but it also created a ceiling for valuation for royalty purposes according to Amoco. The government's valuation of the gas at more than $1.50 per thousand cubic feet, resulting in a royalty greater than the total amount Amoco was receiving on its contract, was, therefore, arbitrary and resulted in a denial of due process under the fifth amendment. ⁴

The government argued, and the MMS found, that the gas from the Vermilion lease was not subject to Amoco's warranty contract with FP & L. That contract did not obligate Amoco to sell the gas from the Vermilion lease to FP & L; the contract could have been satisfied with gas from any source; and Amoco could have sold the gas from the lease to another purchaser. The MMS drew a distinction between warranty contracts and dedication contracts, under which gas from the particular source must go to satisfy a particular contract. It found that section 105 might properly apply to the latter but not to the former. The Director of the MMS therefore affirmed the assessments. Amoco appealed that decision to the IBLA. The IBLA affirmed the decision of the MMS. See 78 IBLA 93 (1983).

Having exhausted its administrative remedies, Amoco filed a Notice of Violation of the OCSLA and subsequently appealed the IBLA's decision to the federal district court. Amoco alleged that the district court had jurisdiction over the action under section 23(b)(1) of the OCSLA, 43 U.S.C. Sec. 1349(b)(1), and also under 28 U.S.C. Secs. 1331 (federal question) and 1337 (commerce). The DOI filed a motion to dismiss for lack of subject-matter jurisdiction, asserting that Amoco's claim was a disguised claim for money damages and therefore, that exclusive jurisdiction lay in the Claims Court under the Tucker Act, 28 U.S.C. Secs. 1346 & 1491(a). The district court denied the DOI's motion to dismiss for lack of jurisdiction. The parties then filed cross-motions for summary judgment and the district court granted the defendants' motion. The court found that, since Amoco was selling gas from the Vermilion lease to FP & L on November 9, 1978, the gas was sold subject to that contract. Thus the ceiling price established by section 105 applied. Nevertheless, the price ceiling did not preclude the MMS' establishing a value for the gas in excess of that ceiling, since the value was established well before the controls took effect. The district court thus affirmed the IBLA's result while rejecting its reasoning. See 627 F.Supp. 1375 (W.D.La.1986). This appeal followed.

On appeal, the government raises anew its argument that the district court did not have subject-matter jurisdiction over this case. As it did in its motion to dismiss to the district court, the government contends that Amoco's claim is actually a disguised claim for a money judgment and therefore, that jurisdiction lies in the Claims Court, or in the United States Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over appeals from the Claims Court and over district court decisions based in whole or in part on 28 U.S.C. Sec. 1346. See 28 U.S.C....