FMC Wyoming Corp. v. Watt, C83-347-K.

• Decision Date: 29 June 1984
• Docket Number: No. C83-347-K.,C83-347-K.
• Citation: 587 F. Supp. 1545
• Parties: FMC WYOMING CORPORATION, Plaintiff, v. James G. WATT, as Secretary of the United States Department of the Interior; Robert F. Burford, as Director of the Bureau of Land Management, United States Department of the Interior; Jim H. Taylor, as Chief, Branch of Solid Minerals, Wyoming State Office Bureau of Land Management; Marla B. Bohl, as former Chief, Land and Mining, Wyoming State Office, Bureau of Land Management; Harold G. Stinchcomb, as former Chief, Branch of Energy Minerals, Wyoming State BLM Office; J. Stan McKee, as former Acting Chief, Branch of Solid Minerals, Wyoming State BLM Office; and the United States Department of the Interior, Defendants.
• Court: U.S. District Court — District of Wyoming

587 F. Supp. 1545

FMC WYOMING CORPORATION, Plaintiff, v. James G. WATT, as Secretary of the United States Department of the Interior; Robert F. Burford, as Director of the Bureau of Land Management, United States Department of the Interior; Jim H. Taylor, as Chief, Branch of Solid Minerals, Wyoming State Office Bureau of Land Management; Marla B. Bohl, as former Chief, Land and Mining, Wyoming State Office, Bureau of Land Management; Harold G. Stinchcomb, as former Chief, Branch of Energy Minerals, Wyoming State BLM Office; J. Stan McKee, as former Acting Chief, Branch of Solid Minerals, Wyoming State BLM Office; and the United States Department of the Interior, Defendants.

No. C83-347-K.

United States District Court, D. Wyoming.

June 29, 1984.

Marilyn S. Kite, Holland & Hart, Cheyenne, Wyo., for plaintiff.

Richard A. Stacy, U.S. Atty., for the District of Wyoming, Cheyenne, Wyo., and Lyle K. Rising, Dept. of the Interior, Denver, Colo., for defendants.

ORDER REVERSING DECISION OF INTERIOR BOARD OF LAND APPEALS WITH FINDINGS

KERR, District Judge.

The above-entitled matter having come on regularly for hearing before the Court upon cross motions for summary judgment and upon request for judicial review of the decision of the Interior Board of Land Appeals (IBLA), plaintiff appearing by and through its attorney, Marilyn S. Kite, and the federal defendants appearing by and through their attorneys, Richard A. Stacy and Lyle K. Rising, and the Court having heard the arguments of counsel in support of and in opposition to said motions and having carefully considered the memoranda on file herein and being fully advised in the premises, FINDS as follows:

This matter was originally brought before this Court as an appeal from the IBLA affirmance of a BLM decision which held (1) that notice of readjustment given on or before the 20 year anniversary of the lease was sufficient for timely readjustment under the statute, and (2) that the 12½% royalty rate named in the Federal Coal Leasing Amendments Act of 1976 (FCLAA) was mandatory upon readjustment of preexisting leases. The relevant facts are as follows:

The United States, through defendant Secretary, issued two federal coal leases to plaintiff on March 1, 1963. The royalty rate fixed in the leases was 17½ cents per ton for strip mined coal. The United States expressly reserved the "right reasonably to readjust and fix royalties payable hereunder and other terms and conditions at the end of 20 years from the date hereof." The leases were also subject to the Mineral Lands Leasing Act of 1920 (MLLA) and all reasonable regulations of the Secretary then in force.

Plaintiff opened the Skull Point Mine near Kemmerer, Wyoming, making substantial investment in the development and production of the coal therein. The mine has been classified as a special bituminous coal mine wherein the cost of extracting the coal increases over the life of the mine due to dipping coal seams. Under that classification the mine is exempt from certain reclamation standards under the Surface Mining Control and Reclamation Act. Only one other mine is so classified in the entire United States—the Pittsburgh and Midway Mine neighboring plaintiff's Skull Point Mine. Plaintiff's royalty was readjusted in April 1983. The anniversary date allowing readjustment of the Pittsburg and Midway lease does not occur until 1998.

In 1976, Section 7 of the MLLA of 1920 which was applicable to plaintiff, was amended to read as follows:

Sec. 7. (a) A coal lease shall be for a term of twenty years and for so long thereafter as coal is produced annually in commercial quantities from that lease. Any lease which is not producing in commercial quantities at the end of ten years shall be terminated. The Secretary shall by regulation prescribe annual rentals on leases. A lease shall require payment of a royalty in such amount as the Secretary shall determine of not less than 12½ per centum of the value of coal as defined by regulation, except the Secretary may determine a lesser amount in the case of coal recovered by underground mining operations. The lease shall include such other terms and conditions as the Secretary shall determine. Such rentals and royalties and other terms and conditions of the lease will be subject to readjustment at the end of its primary term of twenty years and at the end of each ten-year period thereafter if the lease is extended.

March 1, 1983 was the 20 year anniversary date of plaintiff's lease whereupon the leases could be readjusted. Plaintiff was notified on August 23, 1982 that BLM intended to readjust the leases and then was notified by BLM on December 22, 1982 of the proposed terms and conditions of the readjustment. Plaintiff objected to the proposed terms of the readjustment on February 11, 1983. The BLM's response to objections and finalization of the readjustment terms (which still included the 12½% royalty rate) were contained in a decision dated April 6, 1983. Plaintiff claims that readjustment was untimely and is, therefore, barred.

Prior to the FCLAA, the terms of leases subject to readjustment were readjusted on an individual basis. An evaluation was made on the specific facts of each mining operation. Plaintiff presented a factual statement to the BLM and to the IBLA outlining their situation which they contended made the 12½% royalty unreasonable. No hearing was held on the matter. BLM, affirmed by the IBLA, determined that the 12½% royalty rate was absolute and mandatory upon readjustment of pre-FCLAA leases. Plaintiff contends that such a readjustment is arbitrary, capricious and an abuse of discretion.

Both parties rely on the case of Rosebud Coal Sales Co. v. Andrus, No. C79-160B (D.Wyo. June 10, 1980), which case was appealed and affirmed in the Tenth Circuit, Rosebud Coal Sales Co. v. Andrus, 667 F.2d 949 (10th Cir.1982). This Court has made a careful reading of the case, on both levels. As for the untimely readjustment, this Court finds the Rosebud case dispositive and concludes that readjustment was not untimely in the present case. In the Rosebud case the anniversary date of readjustment was April 5, 1975. Notice of Intent to Readjust was not given until October 4, 1977. Both the district court and the Tenth Circuit Court of Appeals found that such readjustment was untimely and thereby barred. However, both courts also indicate that it is notice of intent to readjust that must be given prior to the anniversary date. The district court stated:

Rosebud did nothing here that would have prevented the United States from giving it notice prior to the twenty year anniversary date that the United States intended to readjust the terms of the lease. (citations omitted) Rosebud, C79-160B supra at 10.

. . . . .

On October 4, 1977 the plaintiff was sent a notice that the Department intended to readjust the lease terms. No excuse was offered to show why that simple notice couldn't have been given as easily on April 4, 1975, prior to the end of the term. Id.

. . . . .

The failure to provide the plaintiff any type of notice prior to the twenty year anniversary date does not evidence good faith performance of the express terms of its contract by the government ... Id at 10, 11.

. . . . .

The government could easily have notified Rosebud on April 5, 1975 at least that it intended to readjust the terms of its lease. Id at 14.

The Tenth Circuit Court of Appeals agreed with the district court, affirmed its decision, and stated:

The Government made no showing that the giving of notice at or before the anniversary date was not `feasible.' 667 F.2d at 953.

. . . . .

The failure to give notice in 1975 without a reason to demonstrate it was not `feasible' must constitute a failure by the Department to follow its own regulations had an adjustment been contemplated. Id.

It is clear from the...