Arkla Exploration Co. v. Watt, Civ. No. 82-2168.

• Decision Date: 19 April 1983
• Docket Number: Civ. No. 82-2168.
• Citation: Arkla Exploration Co. v. Watt, 562 F.Supp. 1214 (W.D. Ark. 1983)
• Parties: ARKLA EXPLORATION COMPANY and State of Arkansas, Plaintiffs, v. James G. WATT, Secretary of the United States Department of the Interior, and Texas Oil and Gas Corp., Defendants.
• Court: U.S. District Court — Western District of Arkansas

562 F. Supp. 1214

ARKLA EXPLORATION COMPANY and State of Arkansas, Plaintiffs, v. James G. WATT, Secretary of the United States Department of the Interior, and Texas Oil and Gas Corp., Defendants.

Civ. No. 82-2168.

United States District Court, W.D. Arkansas, Fort Smith Division.

April 19, 1983.

Jim Guy Tucker, Mitchell, Williams & Selig, Little Rock, Ark., Alan S. Novins, Lee Ellen Helfrich, Lobel, Novins & Lamont, Washington, D.C., Robert Roberts, III, Blanchard, Walker, O'Quin & Roberts, Shreveport, La., for plaintiff, Arkla Exploration Co.

Steve Clark, Atty. Gen., and Roger W. Giles, Asst. Attys. Gen., Little Rock, Ark., for plaintiff-intervenor, State of Ark.

W. Asa Hutchinson, U.S. Atty., Fort Smith, Ark., Andrew F. Walch, Patricia J. Beneke, Land and Natural Resources Div., Mark K. Seifert, Energy and Resources Div., Office of the Solicitor, Dept. of the Interior, Washington, D.C., for defendant, James G. Watt.

Bradley D. Jesson, Robert T. Dawson, Hardin, Jesson & Dawson, Fort Smith, Ark., Craig R. Carver, Gibson, Dunn & Crutcher, Denver, Colo., for defendant, Texas Oil and Gas Corp.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

H. FRANKLIN WATERS, Chief Judge.

Introduction

The historical background and factual summary of this action is set forth in the Court's Memorandum Opinion of September 20, 1982, ruling on certain preliminary motions. Arkla Exploration Co. v. Watt, 548 F.Supp. 466 (W.D.Ark.1982), at 468-469. For purposes of brevity, the same will not be reiterated herein.

Hearing on motion for preliminary injunction and trial on the merits was held in Fort Smith from September 27, 1982, through September 30, 1982. At the close of the trial, the Court entered a preliminary injunction restraining the Secretary of the Interior from reinstating certain leases issued noncompetitively to Texas Oil and Gas Corp. (TXO), and restraining TXO from further drilling activities on the lands in question. At the conclusion of the trial, the Court directed the parties to submit simultaneous briefs and proposed findings and conclusions.

Ten witnesses were produced at trial. For the plaintiffs were:

1. W.E. "Bill" Wright — Director, Arkansas Oil & Gas Commission;

2. Boyd Haley — Geologist, U.S. Geological Survey 3. Norman F. Williams, Sr. — State Geologist, State of Arkansas;

4. Cliff C. Burgess — Vice President, Land Department, Arkla Exploration Company;

5. James C. Black — Vice President, Geological and Geophysical Department, Arkla Exploration Company;

6. Charles S. Bartlett, Jr. — Consulting Geologist;

7. Emmett A. Finley — Former Chief, Branch of Mineral Classification, U.S. Geological Survey.

Testifying for defendants were:

1. Doy Zachry — Associate Professor, Department of Geology, University of Arkansas;

2. Gary Horton — Acting Chief, Division of On-Shore Resource Evaluation, Mineral Management Service;

3. Dale Zimmerman — Assistant to the Deputy Director for Energy and Mineral Resources, Bureau of Land Management.

The Court accepted three deposition transcripts, subject to later ruling on objections to portions of the transcripts. These were the depositions (Tr. 131-137) of:

1. Joseph R. Binford — Senior Attorney, TXO;

2. Jeff O. Holdren — Chief, Division of Lands and Minerals Operations, Eastern States Office, Bureau of Land Management;

3. Edward L. Johnson — former Area Geologist, Tulsa, U.S. Geological Survey.

From the evidence adduced at trial, the Court hereby enters the following findings of fact and conclusions of law.

Findings of Fact

1. Fort Chaffee Military Reservation, within which the lands in question are located, lies primarily in the northeast corner of Sebastian County, although portions of both the Fort and the lands extend into western Franklin County (Ex. 26), Arkansas.

2. Geologically, the Fort is within what is known as the Arkoma Basin, which extends from west Texas through Oklahoma to east Arkansas.

3. The Fort lies north of the Ouachita Mountains which are composed of many highly deformed sedimentary rocks (Zachry, Tr. 547), and south of the Ozark Plateau. (Zachry, Tr. 548)

4. The "lands in question" are those sought to be leased by TXO, and comprise 33,510.4 acres within Fort Chaffee. (Ad. Rec. 15-34)

5. In 1920, Congress enacted the Mineral Leasing Act, 41 Stat. 437, as amended, 30 U.S.C. 181 et seq., giving the Secretary discretionary authority to open public domain lands to mineral exploration and development.

6. From 1920 to 1947, the authority of the Secretary of the Interior to lease mineral rights on federal lands was limited under the Mineral Leasing Act to "public domain lands," that is, land claimed by the United States as part of its national sovereignty. 41 Stat. 437, as amended, 30 U.S.C. 181 et seq.

7. In 1947, Congress authorized leasing on "acquired lands," lands acquired by the Federal Government from private owners for public purposes. Mineral Leasing Act for Acquired Lands, 61 Stat. 913, 30 U.S.C. 351 et seq. Fort Chaffee fits within this category. However, that Act specifically excluded military lands from leasing.

8. In 1976, Congress amended the Mineral Leasing Act for Acquired Lands and removed the military lands exclusion, thereby opening up such lands for leasing. Federal Coal Leasing Amendments Act of 1975, § 12, Pub.L. No. 94-377, 90 Stat. 1083 (Tr. 766).

9. Under the Mineral Leasing Act of 1920, oil and gas leasing is divided into two categories: competitive and non-competitive. That Act provides that only lands within a "known geological structure of a producing oil and gas field" may be leased to the highest qualified competitive bidder, 30 U.S.C. 226(b). Otherwise, lands not within a "known geological structure" (KGS), if leased at all, may be leased only to the first qualified applicant on a non-competitive basis. 30 U.S.C. 226(c). (Tr. 761)

10. In May, 1977, some nine months after enactment of the Federal Coal Leasing Amendments Act of 1975, Texas Oil and Gas Corp. (TXO) filed applications for 38 non-competitive oil and gas leases covering 78,000 acres on Fort Chaffee.

11. Neither Arkla nor the Secretary of the Interior was aware that the Federal Coal Leasing Amendments Act of 1975 had the effect of opening Fort Chaffee to mineral leasing without the necessity of notice published in the Federal Register. This issue of first impression was decided in TXO v. Watt, 683 F.2d 427 (D.C.Cir.1982).

12. In September, 1977, the Department of the Interior published draft regulations implementing the changes brought about by the Federal Coal Leasing Amendments Act of 1975. 42 Fed.Reg. 46,558-46,559 (Sept. 16, 1977). These regulations became effective in September, 1978. 43 Fed.Reg. 37,202.

13. Eighteen of TXO's applications covering 45,000 acres were either rejected or withdrawn by the company because either (1) the Army would not permit leasing, (2) the United States did not hold the mineral rights in the area, or (3) the areas were within a known geologic structure (KGS), making them available only for competitive leasing.

14. Twenty of TXO's offers to lease lands at Fort Chaffee were accepted by the Bureau of Land Management (BLM) and leases were issued effective July 1, 1979, covering approximately 33,000 acres. The total lease payments received were $33,000.00.

15. Arkla filed a protest on September 17, 1979, with the Eastern States Office, BLM, against the issuance of the TXO leases (Arkla Amended Complaint, p. 2).

16. The Secretary of the Interior concluded that the Fort Chaffee leases, having been issued on applications submitted prior to the effective date of the new regulations implementing changes brought about by the Federal Coal Leasing Amendments Act of 1975 should not have been issued. On November 1, 1979, he issued a decision cancelling the leases and rejecting all pending applications for leases on military lands which had been filed prior to September 21, 1978, the effective date of the new regulations. See, e.g., Ad.Rec. 15. TXO sued to have the leases reinstated.

17. The district court upheld the Secretary's action. Texas Oil & Gas Corp. v. Andrus, 498 F.Supp. 668 (D.D.C.1980).

18. The administrative protest filed by Arkla was dismissed as moot on January 3, 1980, and no appeal to the Interior Board of Land Appeals was taken.

19. On August 4, 1982, plaintiff Arkla filed its complaint, seeking an order directing the Secretary of the Interior not to issue twenty (20) oil and gas leases to TXO on Fort Chaffee, Arkansas.

20. Plaintiff Arkla's complaint raises the following claims: (1) that the Department of the Interior (DOI) was arbitrary and capricious in promulgating the current definition of a "known geological structure of a producing oil or gas field" (KGS) found at 43 C.F.R. 3100.0-5(a); (2) that the KGS determination made in this instance was arbitrary and capricious; (3) that defendant violated the Administrative Procedure Act (APA) in not publishing a notice in the Federal Register that the Fort Chaffee lands were available for leasing; (4) that defendant violated plaintiff's due process rights; and (5) that defendant violated Sections 302(b) and 303(c)(1) of the Department of Energy Organization Act, 42 U.S.C. §§ 7152(b), 7153(c) (Pub.L. No. 95-91, August 4, 1977).

21. Plaintiff Arkla sought a temporary restraining order, which was granted by order of August 5, 1982.

22. In addition to opposing plaintiff's motion for preliminary injunction, both the federal defendant and TXO filed motions to dismiss. Federal defendant raised several bases for dismissal, including that: (1) plaintiff lacks standing to pursue its action; (2) this Court lacks subject matter jurisdiction over the action; (3) Congress did not create a private cause of action under the Mineral Leasing Act of 1920; (4) the action is barred by the ninety-day statute of limitations in the Mineral Leasing Act of 1920; (5) Arkla failed to avail itself of administrative remedies and hence is barred from pursuing its action here; (6) the...