Geosearch, Inc. v. Andrus, C80-205K

• Decision Date: 20 February 1981
• Docket Number: C80-258K,No. C80-205K,C80-259K and C80-292K.,C80-205K
• Citation: 508 F. Supp. 839
• Parties: GEOSEARCH, INC., Plaintiff, v. Cecil D. ANDRUS, Secretary of the Interior et al., Defendants.
• Court: U.S. District Court — District of Wyoming

508 F. Supp. 839

GEOSEARCH, INC., Plaintiff, v. Cecil D. ANDRUS, Secretary of the Interior et al., Defendants.

Nos. C80-205K, C80-258K, C80-259K and C80-292K.

United States District Court, D. Wyoming.

February 20, 1981.

COPYRIGHT MATERIAL OMITTED

Melvin E. Leslie, Salt Lake City, Utah, and James L. Huemoeller, Cheyenne, Wyo., for plaintiff.

Kathryn A. Oberly, U. S. Dept. of Justice, Washington, D. C., and Toshirc Suyematsu, Asst. U. S. Atty., for the Dist. of Wyoming, Cheyenne, Wyo., for Cecil D. Andrus, Secretary of the Interior.

Maxwell T. Lieurance, State Director, Bureau of Land Management, Dept. of the Interior, Glenna M. Lane, Chief, Oil and Gas Section, Wyoming State Bureau of Land Management, Dept. of the Interior, William J. Thomson, Cheyenne, Wyo., for Warren R. Haas and George B. Peays.

Hugh C. Garner, Salt Lake City, Utah, for Banner Oil & Gas Ltd.

Houston G. Williams, Casper, Wyo., and B. Lee Ware, Jr., Houston, Tex., for Michigan Wisconsin Pipe Line Co.

Steve F. Freudenthal, Cheyenne, Wyo., for Sundance Oil Co.

John A. Hutchings, Denver, Colo., and James H. Barrett, Cheyenne, Wyo., for R. K. Cramer, Gemini Corp.

William E. Murane and John F. Shepherd, Denver, Colo., for Barbara Davis and Davis Oil Co.

Robert C. Hawley and Gretchen A. Vanderwerf, Denver, Colo., for Dome Petroleum Corp.

Robert C. Grable, Fort Worth, Tex., for Bass Enterprises Production Co.

Brent R. Kunz, Cheyenne, Wyo., for Bonnie J. Brown and Maurice W. Brown.

John W. Madden, III, Denver, Colo., for Johnson-Mizel Oil Co. and Eva Hecht.

Jerome F. Statkus, Cheyenne, Wyo., for Robert Cieslik and Resource Service Co., Inc.

Morris R. Massey and Claude W. Martin, Casper, Wyo., for J. S. Harrell, General American Oil Co. of Tex., Charles E. Johnson, Elias F. Galeotos, A. G. Andrikopoulos, Thomas Wittenwyler, Rex H. Richardson, Inexco Oil Co., Harrell & Bradshaw, Louisiana Land and Exploration Corp., E. C. Markley and A. Lansdale.

Marilyn S. Kite, Laramie, Wyo., for Banner Oil & Gas Ltd., Barbara Davis and Davis Oil Co. and Bass Enterprises Production Co.

MEMORANDUM OPINION.

KERR, Senior District Judge.

These four cases arise under the Mineral Leasing Act of 1920, as amended, 41 Stat. 437, 30 U.S.C. §§ 181-226. There are common issues of fact and law in all four cases and this Court ordered on November 19, 1980 that the four cases be consolidated.

The plaintiff in all four cases is Geosearch, Inc. (Geosearch). Geosearch is an organization which sends standardized form letters to second drawees under the simultaneous oil and gas leasing system, offering to search for any possible defects in the offer of the first drawee. Should a potential defect be discovered, Geosearch protests the issuance of the lease. If the protest is successful and the lease is issued to the second drawee, Geosearch retains a percentage in the lease.

In these cases, Geosearch is seeking this Court's review of seven separate decisions of the Interior Board of Land Appeals (IBLA). Fifteen leases issued under the simultaneous oil and gas leasing system as it existed prior to June 16, 1980 are involved in the seven IBLA decisions.

According to Geosearch, jurisdiction is based on federal question, 28 U.S.C. § 1331(a); the Federal Mandamus Statute, 28 U.S.C. § 1361, the Federal Declaratory Judgments Act, 28 U.S.C. § 2201, the Administrative Procedure Act, 5 U.S.C. §§ 702 and 706; the Mineral Leasing Act, 30 U.S.C. § 181 et seq.; and the Fifth Amendment to the United States Constitution. Review by this Court is predicated on the Administrative Procedure Act. These consolidated actions came on regularly for hearing before the Court upon twenty three motions to dismiss filed by various defendants.

The Mineral Leasing Act of 1920, as amended, and its implementing regulations set up a system to lease lands subject to disposition under the Act. The purpose of the Act is to promote the orderly development of oil and gas deposits in publicly owned lands of the United States through private enterprise. Harvey v. Udall, 384 F.2d 883 (10th Cir. 1967).

Section 17(a) of the Act, 30 U.S.C. § 226(a) succinctly states that "All lands subject to disposition under this chapter which are known or believed to contain oil or gas deposits may be leased by the Secretary." The leasing of a tract of land is left to the discretion of the Secretary. Udall v. Tallman, 380 U.S. 1, 85 S.Ct. 792, 13 L.Ed.2d 616, reh. den., 380 U.S. 989, 85 S.Ct. 1325, 14 L.Ed.2d 283.

Two different procedures are followed when leasing the lands. The procedure chosen is dependent upon whether or not the lease covers lands within a known geological structure. Section 17(b) of the Act, 30 U.S.C. § 226(b) makes it clear that if the lease is located within "a known geological structure of a producing oil and gas field", the lease should be granted to the "highest, responsible, qualified bidder by competitive bidding."

In the event that the lease covers lands that are not currently known to be within a known geological structure, Section 17(c) of the Act, 30 U.S.C. § 226(c), provides that the Secretary shall grant the lease to "the person first making application for the lease who is qualified to hold a lease under this chapter." That person "shall be entitled to a lease of such lands without competitive bidding." These leases are called "noncompetitive leases."

Pursuant to Section 32, 30 U.S.C. § 189, the Secretary is authorized "to prescribe necessary and proper rules and regulations and to do any and all things necessary to carry out and accomplish the purposes of this chapter..." Many rules and regulations have been promulgated in accordance with this directive, some of which are relevant to the cases currently being considered by this Court.

In an attempt to eliminate chaos and establish uniformity, the Secretary promulgated regulations establishing a simultaneous filing and a public drawing in the event of multiple applications for leases. Initially a notice is published designating lands available for lease by the Bureau of Land Management (BLM). The notice invites the filing of simultaneous oil and gas offers pursuant to the noncompetitive leasing provisions of the Act, 30 U.S.C. § 226(c) and 43 C.F.R. § 3110, et seq. A public drawing is held and the lease must issue to the first drawee, providing the requisite qualifications as set down by the Act and rules and regulations promulgated thereunder have been met. Ballard E. Spencer Trust, Inc. v. Morton, 544 F.2d 1067 (10th Cir. 1967).

An offer to lease is submitted on a BLM form known as a "Simultaneous Oil and Gas Entry Card" or a "drawing entry card" (DEC).

On the third Monday of each month the State BLM offices post a list of lands available for leasing. DEC's are submitted by parties interested in the leases. All DEC's are treated as if they were simultaneously filed. A drawing is held and three DEC's are drawn. If the first card drawn was filed by a qualified applicant, that applicant receives the lease upon payment of the first year's rental. If the rules and regulations were violated in some manner, the first drawee would not receive the lease. The second and third drawees' offers would be considered in the same way. If no qualified applicants were found among the three drawees, the lands under consideration would again be put up for lease in the next drawing. See, 43 C.F.R. § 3112.1-2; 43 C.F.R. § 3112.2-1; 43 C.F.R. § 3112.4-1; 43 C.F.R. § 3112.5-1. Unsuccessful drawees are notified by the return of their respective DEC's 43 C.F.R. § 3112.2-1(4). The Court notes in passing, however, that although the only notice to second and third drawees described in the regulations is by the return of the DEC's, a public list of the lease drawees is typed up and placed on BLM bulletin boards for public inspection. Furthermore, a mailing list is kept by the BLM office and copies of the list of drawees are sent to all those on the mailing list. A phone call and an agreement to pay the small charge for the copy of the list is all that is required to get one's name on the mailing list.

The appeal procedure for unsuccessful drawees is outlined by 43 C.F.R. § 4.411. If the unsuccessful drawee desires to appeal the adverse decision, a notice of appeal must be filed in the office of the officer who made the decision. The notice must be filed within thirty (30) days after the party taking the appeal is served with the decision from which the appeal is taken. The appeal mechanism as it relates to the simultaneous oil and gas leasing system is very clear. The 30 day appeal period begins to run when the second and third drawees are notified by the return of their DEC's that their offers have been rejected. If the unsuccessful drawees do not appeal within thirty (30) days, the rejection of the offer is final.

Although the regulations for the simultaneous leasing system were revised and became effective on June 16, 1980, the revision has no effect on the leases which are the subject matter of these four cases. The above-described system was in effect at the time of the issuance of the leases in the four cases currently under consideration.

Civil No. C80-205K

Geosearch instituted civil suit C80-205K as an appeal from a decision of the IBLA affirming the issuance of lease W-63057 to Warren R. Haas (Haas). Haas is an individual residing in New York and was the first drawee for lease W-63057. Lease W-63057 was issued effective May 1, 1978 to Haas. On June 23, 1978, Haas assigned the lease to Banner Oil and Gas, Ltd. (Banner), reserving an overriding royalty of 6.25%. The assignment was approved by the State BLM Office effective August 1, 1978. Geosearch acquired by letter agreement the rights of the second drawee, Jane E. Snyder on June 19, 1979. On October 5, 1979, some 18 months after the issuance of the lease, Geosearch filed a protest with the State BLM Office regarding the issuance of the lease to Haas. Geosearch claimed that Haas' DEC was filed...