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

• Court: United States District Courts. 8th Circuit. Western District of Arkansas
• Writing for the Court: H. FRANKLIN WATERS
• Citation: 548 F. Supp. 466
• Parties: ARKLA EXPLORATION CO., et al., Plaintiffs, v. James G. WATT, Secretary of the United States Department of the Interior, and Texas Oil and Gas Corp., Defendants.
• Docket Number: Civ. No. 82-2168.
• Decision Date: 20 September 1982

548 F. Supp. 466

ARKLA EXPLORATION CO., et al., 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.

September 20, 1982.

548 F. Supp. 467

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. Atty. 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., Washington, D. C., Mark K. Seifert, Energy and Resources Division, 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 &

548 F. Supp. 468

Crutcher, Denver, Colo., for defendant, Texas Oil and Gas Corp

MEMORANDUM OPINION

H. FRANKLIN WATERS, District Judge.

I. Historical Background and Factual Summary

Congress first authorized mineral exploration and development of government land in 1920, when it gave the Secretary discretionary authority to open "public domain lands" to leasing. 30 U.S.C. §§ 181-263. In 1947 Congress authorized mineral leasing on lands "acquired" by the federal government from private owners. 30 U.S.C. §§ 351-359. Under the 1947 Act, lands acquired by the United States and set apart for military or naval purposes were excluded from leasing. 30 U.S.C. § 352.

Pursuant to the exclusion of military lands, Department of the Interior regulations tracked the exclusion and prohibited any mineral leasing on military lands. 43 C.F.R. § 3101.2-1(f). In 1976 Congress removed the exclusion from the statute, thus making military lands subject to availability for leasing at the Secretary's discretion. 30 U.S.C. § 352 (Federal Coal Leasing Amendments Act of 1975). The Department of the Interior failed to contemporaneously alter its regulations which prohibited mineral leasing.

In 1977, the Bureau of Land Management began the process of changing its pre-1976 regulations. The Bureau published a notice of proposed rulemaking in the Federal Register, proposing to alter Regulation 3101.2-1 so as to reflect the 1976 Amendments. See 42 Fed.Reg. 46,558 (1977). The 1977 Notice declared that the proposed rule would authorize the Department of the Interior to lease lands acquired for military or naval purposes, reflecting the authority granted by the Federal Coal Leasing Amendments Act, increasing the amount of land available for oil and gas leasing. The "Supplementary Information" of the 1977 Notice declared that the regulatory prohibition reflecting the old statutory provision remained in effect, serving as an exercise of the Secretary's authority to lease or not to lease such lands. The regulatory amendments became effective in September, 1978. See 43 Fed.Reg. 37,202 (1978).

In May of 1977, Texas Oil and Gas Corp. (TXO) filed applications with the Bureau of Land Management for noncompetitive oil and gas leases on lands at Fort Chaffee. It was four months later that the Bureau began to change the pre-1976 regulations.

Even though the 1977 Notice had frozen any leasing until the rulemaking was completed, the Bureau proceeded to process TXO's applications.

In August of 1977, the Department of Energy Organization Act, 42 U.S.C. § 7152, transferred the authority to promulgate regulations under the Mineral Lands Leasing Act and the Mineral Leasing Act for Acquired Lands from the Secretary of the Interior to the Secretary of Energy, for the purpose of fostering competition for federal leases. The Department of Energy Organization Act requires the Secretary of the Interior to afford the Secretary of Energy at least thirty (30) days to disapprove any term or condition which related to any matter with respect to any matter within the new purview of the Secretary of Energy.

On June 26, 1979, TXO's applications, dated May 6, 1977, were accepted by the Chief, Division of Lands and Minerals, Bureau of Land Management, on behalf of the United States and with the consent of the Corps of Engineers, and twenty (20) leases were issued to TXO with an effective date of July 1, 1979.

Arkla filed a "protest" of the Secretary's issuance of these leases on September 17, 1979, and four days later filed suit in the District Court for the District of Columbia and the Western District of Arkansas. Subsequently, on September 20, 1979, the Secretary directed the U. S. Geological Survey of the Bureau of Land Management to re-evaluate its non-KGS classification of the leased land. Consequently, TXO sought a temporary restraining order on November 1, 1979. The TRO hearing was scheduled for November 2, 1979. On the evening of

548 F. Supp. 469

November 1, the Secretary issued a decision in which he cancelled the twenty (20) Fort Chaffee leases and rejected all pending applications that had been filed prior to September 21, 1978, the effective date of the Department's new regulations in accordance with the 1976 amendment to the Mineral Leasing Act for Acquired Lands, and further declared a moratorium on the leasing of all acquired military lands pending full re-evaluation of the leasing procedures

Arkla's "protest" was then dismissed as moot. TXO subsequently amended its complaint to convert the suit to one for permanent relief.

The District Court for the District of Columbia issued two memorandum opinions on September 25, 1980, Texas Oil and Gas Corp. v. Andrus, 498 F.Supp. 668 (D.D.C. 1980), finding for the Secretary on his cross-motions for summary judgment. The decisions were consolidated for appeal.

The United States Court of Appeals for the District of Columbia reversed on June 11, 1982, holding that the Secretary, in cancelling the leases, acted in excess of his authority. The court reasoned that the 1976 Amendments made the lands in question immediately subject to leasing, without any regulatory implementation being necessary.

On July 30, 1982, the District Court was mandated to issue an order directing the Secretary of the Interior to reinstate the leases.

On August 4, 1982, Arkla refiled the instant action raising issues not considered by the District of Columbia courts, seeking equitable and declaratory relief.

Subsequently, the government stipulated, with the approval of TXO and all parties, to take no action to change the status of the matter until at least September 30, 1982.

Both the government and TXO moved to dismiss Arkla's complaint, raising issues of standing, unavailability of a private cause of action, collateral estoppel, exhaustion, and statute of limitations. The Court, after consideration of the briefs submitted, orally advised the parties of the Court's intention to deny the motions to dismiss.

Subsequently, the State of Arkansas moved to intervene, as well as Greenwood School District No. 25, Lavaca School District No. 3, Charleston School District No. 9, and Fort Smith Special School District. On September 9, 1982, the Court orally advised the parties that the State of Arkansas would be permitted to intervene, but that the motions of the school districts for intervention were to be denied.

The government and TXO also moved to limit this Court's review to the administrative record. After reviewing the arguments, the Court advised the parties that review would be limited to the record, but that the record could be supplemented as necessary to show the adequacy or inadequacy of the facts considered by the Secretary as well as the procedures utilized by the Secretary in reaching his decisions, and to provide the Court with sufficient technical expertise to allow the Court to understand the complex factual issues presented.

Pursuant to these rulings, the Court issues this Memorandum Opinion. The issues raised will be discussed in turn.

II. Discussion

A. Standing

The government and TXO assert that Arkla lacks standing to seek this Court's review, relying primarily upon Geosearch v. Andrus, 508 F.Supp. 839 (D.Wyo. 1981), and Pullman v. Chorney, 509 F.Supp. 162 (D.Colo.1981), among others,

In Geosearch, supra, the District Court of Wyoming found standing lacking. In that case, the plaintiff, Geosearch, was an organization which actively searched for defects in the offer of the first drawee of non-KGS tracts of land for oil and gas leases. If their protest was successful, and if the lease was reissued to the second drawee, Geosearch retained a percentage in the lease. However, the first drawees had previously assigned the leases to bona fide purchasers in several of the situations presented, and in others had failed to timely file a "protest."

548 F. Supp. 470

Standing was found lacking because:

In order to have standing, Geosearch must prove that it has an injury in fact that is likely to be redressed by a favorable decision of the court. Citizens Concerned For Separation of Church and State v. City and County of Denver, 628 F.2d 1289 (10th Cir. 1980); Duke Power Co. v. Carolina Env. Study Group, Inc., 438 U.S. 59 98 S.Ct. 2620, 57 L.Ed.2d 595 (1978). See also Data Processing Service v. Camp, 397 U.S. 150 90 S.Ct. 827, 25 L.Ed.2d 184 (1970). Even if Geosearch could demonstrate any irregularities in the issuance of the leases to the first drawees, and this Court does not so hold, the leases, if cancelled, would not be reissued to Geosearch. Under the regulations, the cancelled leases would be withdrawn, offered at a competitive bid or subjected to a new simultaneous drawing. See 43 C.F.R. § 3112.1. Geosearch cannot demonstrate any injury in fact and, therefore, has no standing.

Id. at 845.

Thus, because the court was unable to award the relief requested and because Geosearch...