Coastal States Energy Co. v. Hodel, 86-1301
| Decision Date | 09 April 1987 |
| Docket Number | No. 86-1301,86-1301 |
| Citation | 816 F.2d 502 |
| Parties | COASTAL STATES ENERGY COMPANY, Plaintiff-Appellant, v. Donald P. HODEL, Secretary of the United States Department of the Interior; Robert F. Burford, Director of the Bureau of Land Management, United States Department of the Interior; Robert Lopez, Chief, Minerals Section, Utah State Office of the Bureau of Land Management, United States Department of the Interior; and the United States Department of the Interior, Defendants- Appellees. Sierra Pacific Power Company; Utah Mining Association; State of Utah; Unelco, Inc., Amicus Curiae. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Lawrence E. Stevens (Patrick J. Garver and Patricia J. Winmill of Parsons, Behle & Latimer, Salt Lake City, Utah; and Brian E. McGee of Parcel & Mauro, Denver, Colo., with him on the briefs), for plaintiff-appellant.
Peter Stirba, Asst. U.S. Atty. (Brent D. Ward, U.S. Atty., with him on the brief), Salt Lake City, Utah, for defendants-appellees.
John Madariaga and Margaret A. Manes, Reno, Nev., for amicus curiae Sierra Pacific Power Co.
David L. Wilkinson, Dallin W. Jensen and Michael M. Quealy, Salt Lake City, Utah, for amicus curiae State of Utah.
K.L. McIff of Jackson, McIff & Mower, Richfield, Utah, for amicus curiae Unelco, Inc.
James T. Jensen, Price, Utah, for amicus curiae Utah Mining Ass'n.
Before LOGAN, MOORE and McWILLIAMS, Circuit Judges.
This dispute concerns a readjustment by the Secretary of the Interior of the terms and conditions of two coal leases between the United States and Coastal States Energy Company, the latter a Texas corporation which operates an underground coal mine, known as the SUFCo Mine, in Sevier County, Utah. On administrative appeal, the Interior Board of Land Appeals (IBLA) upheld, in the main, the readjustments made by the Bureau of Land Management (BLM), holding that the readjustments were timely made and were themselves lawful. Coastal States Energy Co., 70 IBLA 386 (1983). Thereafter Coastal filed a petition for review in the United States District Court for the District of Utah. After discovery, Coastal and the Secretary filed motions for summary judgment. The district court granted summary judgment for the Secretary on all of Coastal's claims except the third claim. 1 Subsequently, additional evidentiary matter bearing on the third claim was given the district court. Then, after further hearing, the district court granted the Secretary summary judgment on Coastal's third claim. The district court's opinion entering summary judgment in favor of the Secretary on all of Coastal's claims appears as Coastal States Energy Co. v. Watt, 629 F.Supp. 9 (D.Utah 1985). On appeal, we affirm with one exception. The instant case is a companion case to FMC Wyoming Corporation v. Hodel, 816 F.2d 496 (10th Cir.1987).
Coastal, as the successor in interest, holds two leases issued by the Secretary under the Mineral Lands Leasing Act of 1920 (MLLA), 41 Stat. 437 (1920), amended by 30 U.S.C. Sec. 201 et. seq. (1976), permitting underground coal mining in Sevier County, Utah. The first lease, designated as the SL lease, was entered into on September 11, 1941. The second lease, designated the U lease, was executed on March 1, 1962. MLLA (1920) provided that coal leases issued by the Secretary would be for an indeterminate term, but subject to the right of the Secretary to readjust the terms of the lease at the end of each 20-year period following the date of issuance of the lease. 41 Stat. 437, Sec. 7 (1920). In accord with the provisions of MLLA (1920), both of Coastal's leases provided for readjustment of terms and conditions at the end of each 20-year period following the date of issuance of the lease. 2
Coastal's SL lease had its first 20-year anniversary date on September 11, 1961. At that time the SL lease was readjusted by the Secretary, the readjustment including raising the royalty rate from ten cents to fifteen cents per ton of coal mined. 3
The second 20-year anniversary date for the SL lease was September 11, 1981. On July 9, 1981, 63 days before the September 11, 1981, anniversary date, BLM sent notice to Coastal of its intent to readjust the terms and conditions of the SL lease. 4 The readjusted terms and conditions of the SL lease were sent Coastal on September 28, 1981. Coastal objected to the readjusted terms and conditions. The BLM, on March 18, 1982, dismissed these objections, and, as above indicated, on February 9, 1983, the IBLA, on administrative appeal, upheld in major and pertinent part the decision of BLM. Coastal States Energy Co., 70 IBLA 386 (1983).
Coastal's U lease had its first 20-year anniversary date on March 1, 1982. On October 9, 1981, over five months before the March 1, 1982, anniversary date, the Secretary gave notice to Coastal of his intent to readjust the terms and conditions of the U lease. On December 24, 1981, slightly more than two months before the March 1, 1982, anniversary date, BLM sent the readjusted terms and conditions to Coastal. Coastal's objections to the readjustments to the U lease were dismissed by the BLM in its decision of March 18, 1982, and BLM's action in regard to the U lease changes was upheld with one minor exception by the IBLA in its decision of February 9, 1983. 70 IBLA 386. Coastal then sought judicial review of the IBLA's decision of February 9, 1983, as such relates to both leases.
Section 7 of MLLA (1920) provides that a coal lease issued pursuant to the Act shall be for an indeterminate period, but upon the condition that "at the end of each 20-year period" succeeding the original date of the lease the Secretary may readjust the terms and conditions of the original lease. Coastal's two leases contain language tracking the statutory language. In the companion case of FMC Wyoming Corp. v. Hodel, 816 F.2d 496 (10th Cir.1987), we found that notice of intent to readjust the terms and conditions of a coal lease sent on or before the anniversary date preserves the Department's right to readjust the terms within a reasonable time thereafter. Having carefully considered Coastal's arguments to the contrary, we again conclude that the readjustment of Coastal's leases was timely as the Interior duly notified Coastal of its intent to readjust the lease prior to the anniversary dates of the lease. 5
The BLM readjusted the terms and conditions of Coastal's two leases in several particulars, including the royalty rate increase to 8% of the value of the coal mined, the deletion of the credit against royalty payments for rental payments, the substitution of monthly royalty payments for quarterly payments, increased bond requirements, and change of the readjustment intervals from 20 to 10 years. Coastal puts in issue the lawfulness of all these readjustments, with particular emphasis, of course, on the royalty increase.
Our starting point in this discussion is MLLA (1920), which was the statutory authority under which the present leases were issued by the Secretary. Section 7 of that Act provided as follows:
Leases shall be for an indeterminate period ... upon the further condition that at the end of each 20-year period succeeding the date of the lease such readjustment of terms and conditions may be made as the Secretary of the Interior may determine, unless otherwise provided by law at the expiration of such periods.
Both of Coastal's leases incorporated the language of this statute.
As we stated in FMC Wyoming Corp., supra, section 7 of the Act, inter alia, clearly advises the lessee coal company that at the end of 20 years the Secretary is empowered to readjust the terms and conditions of the coal lease as he, or she, may determine. This is, of course, a very broad authority which Congress saw fit to grant to the Secretary, an authority which is only subject to the proviso "unless otherwise provided by law at the expiration of such [twenty-year] periods." So, at the end of 20 years, the Secretary may readjust as he, or she, determines, unless the statutory law in effect on the 20-year anniversary date provides, for example, that a particular term be included in the lease. 6 As we found in FMC Wyoming Corp., supra, the passage of FCLAA (1976) established such statutory law, setting forth the minimum provisions for federal coal leases. Such being the case, the Secretary in readjusting the terms and conditions of Coastal's leases was required to act in conformity with FCLAA (1976).
Although, as indicated, the Secretary readjusted several significant terms and conditions of the SL and U leases on their 20-year anniversary dates, primary focus is on the increased royalty rate. On the anniversary date of each lease Coastal was paying, and for the prior 20 years had been paying, a royalty rate of fifteen cents per ton of coal mined. Although MLLA (1920) empowered the Secretary to originally determine and fix the royalty rate, it also provided that such rate should not be less than five cents per ton. FCLAA (1976), in effect, reaffirmed the authority of the Secretary to determine and fix the royalty rates of coal leases, but also provided that such rate must be "not less than twelve and one-half per centum of the value of the coal ..., except that the Secretary may determine a lesser amount in the case of coal recovered by underground mining operations." Acting pursuant to this statute, the Department published a regulation which reads as follows:
A lease shall require payment of a royalty rate of not less than 8 per centum of the value of the coal removed from an underground mine, except that an authorized office may determine a lesser amount, but in no case less than 5 percent if conditions warrant.
43 C.F.R. Sec. 3473.3-2(a)(3) (1979).
The BLM interpreted the foregoing regulation as meaning that on the anniversary dates of Coastal's...
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