Hoyl v. Babbitt

• Decision Date: 25 November 1997
• Docket Number: No. 96-1388,96-1388
• Citation: 129 F.3d 1377
• Parties: 138 Oil & Gas Rep. 278, 28 Envtl. L. Rep. 20,286, 97 CJ C.A.R. 2971 Alfred G. HOYL, Plaintiff-Appellant, v. Bruce BABBITT, Secretary, Department of the Interior, Defendant-Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1377

129 F.3d 1377

138 Oil & Gas Rep. 278, 28 Envtl. L. Rep. 20,286,

97 CJ C.A.R. 2971

Alfred G. HOYL, Plaintiff-Appellant, v. Bruce BABBITT, Secretary, Department of the Interior,

Defendant-Appellee.

No. 96-1388.

United States Court of Appeals, Tenth Circuit.

Nov. 25, 1997.

Constance E. Brooks (Diane Vaksdal Smith of C.E. Brooks & Associates, P.C., and James F. Engelking of James F. Engelking, P.C., Denver, Colorado, with her on the brief), of C.E. Brooks & Associates, P.C., Denver, Colorado, for Plaintiff-Appellant.

Ellen J. Durkee (Lois J. Schiffer, Assistant Attorney General, Environment and Natural, Resources Division and David C. Shilton, United States Department of Justice, Environment and Natural Resources Division, Washington, DC, and Henry J. Solano, United States Attorney and Robert D. Clark, Assistant United States Attorney, Denver, Colorado, and Lyle K. Rising, Office of the Solicitor, Rocky Mountain Region, Department of Interior, Lakewood, Colorado, with her on the brief), United States Department of Justice, Environment and Natural Resources Division, Washington, DC, for Defendant-Appellee.

Before PORFILIO, ANDERSON, and BALDOCK, Circuit Judges.

BALDOCK, Circuit Judge.

Plaintiff Alfred G. Hoyl appeals the district court's order affirming the Department of Interior, Bureau of Land Management's (BLM's) denial of his request for a coal lease suspension pursuant to § 39 of the Mineral Leasing Act. 30 U.S.C. § 209. As grounds for reversal, Plaintiff asserts that: 1) the district court's findings of fact are not supported by substantial evidence; 2) the district court erred by affirming the BLM's denial of his request for a coal lease suspension because "the denial differed significantly from past agency precedent;" 3) the district court erred by holding that a present market for coal, actual coal lease production, and authorization to mine are prerequisites for a § 39 suspension; and 4) the district court erred in finding that Plaintiff was not denied due process when the Interior Board of Land Appeals (IBLA) refused his request for an evidentiary hearing. Our jurisdiction arises under 28 U.S.C. § 1291. We affirm.

I.

In 1920, Congress authorized the Secretary of Interior to lease federal mineral properties to private parties. 30 U.S.C. § 181. Congress authorized the Secretary to issue prospecting permits to qualified applicants. Pursuant to the terms of the prospecting permits, once the applicant discovered coal on the lands covered by the permit and proved its existence to the Secretary, the applicant's prospecting permits ripened into preference right lease applications (PRLAs). Thereafter, if the holder of the PRLAs proved that coal existed in commercial quantities, the Secretary would issue federal coal leases to the applicant. Under this system, a few large companies controlled the vast majority of federal coal deposits and large tracts of federal coal lands remained idle.

Concerned, among other things, about speculative holding of federal coal leases, Congress passed the Federal Coal Leasing Amendments Act (FCLAA), 30 U.S.C. §§ 201-209. In doing so, Congress created a "diligent development" requirement which forced lessees to produce coal from their leases in "commercial quantities" ¹ within ten years of lease issuance. Thus, if a lessee fails to produce coal in commercial quantities within ten years of lease issuance, the lease lapses. Under the amended Mineral Leasing Act, a federal coal lease may be suspended ²: (1) under § 7(b) if lease development is halted by a force majeure, 30 U.S.C. § 207(b); or (2) under § 39 "for the purpose of encouraging the greatest ultimate recovery of coal ... and in the interest of conservation of natural resources." 30 U.S.C. § 209.

A § 39 suspension is generally appropriate where the Secretary has taken action which prohibits the lessee from having timely access to the lease or where the lessee requests a suspension in the interest of conserving natural resources. When the Secretary prevents timely access to the lease, a de facto suspension occurs to which the lessee is entitled as a matter of right. Copper Valley Machine Works, Inc., v. Andrus, 653 F.2d 595, 602-605 (D.C.Cir.1981). Where the Secretary, through some affirmative action, prevents a lessee from accessing and developing his federal coal lease, the lessee should not be penalized by having that time count against his due diligence period. Id. at 602-03 (citing H.R.Rep. No. 1737, 72d Cong., 1st Sess. 2-3 (1932); 76 Cong. Rec. 705, 1881 (1932)(remarks of Representative Eaton)).

When a lessee requests a suspension on the basis of conservation of natural resources, however, the matter is committed to agency discretion. Copper Valley, 653 F.2d at 604 (implying that agency's decision to grant suspension in the interest of conserving natural resources is discretionary.). Section 39 is an equitable provision. Accordingly, the courts and the Department of Interior have liberally construed the phrase "in the interest of conservation of natural resources" to not only encompass conserving mineral deposits, but also to prevent environmental harm. Id. at 600; Stephen G. Moore, 111 IBLA 326, 329 (1989). With this background in mind, we proceed to the present appeal.

II.

On October 1, 1966, Gerald Tresner obtained permits allowing him to prospect for coal on certain federal lands north of Fruita, Colorado. Tresner discovered coal, and as a result received three PRLAs for the lands covered by the prospecting permits. In order for the PRLAs to become actual coal leases, Tresner had to prove that coal existed in commercially viable quantities.

Plaintiff and Donald E. Wilde owned fee land containing coal outcroppings next to Tresner's PRLAs. To prove his PRLAs were commercially viable, Tresner entered into an agreement with Plaintiff and Wilde to mine their adjacent fee land. Plaintiff submitted a mine plan to the United States Geological Service, which approved the plan on July 23, 1977. Plaintiff, Tresner, and Wilde then contracted with Dorchester Coal Company which mined the fee land up to the boundary between the fee land and the PRLAs. After completing the fee land mining, Tresner assigned the PRLAs to Dorchester. The BLM, apparently satisfied that the PRLAs were commercially viable, issued three separate leases to Dorchester on July 1, 1981, thus beginning the ten-year diligent development period. Plaintiff, Wilde, and Tresner retained royalty interests in the leases.

Between 1981 and 1983, exploratory operations on the three leases suggested that each of the leases could be mined as a single independent operation. Based on this information, Dorchester submitted separate mine plans for each lease to the Office of Surface and Mining (OSM) and the Mined Land Reclamation Division (MLRD). The agencies determined that the submitted plans were deficient, and requested more information from Dorchester on March 15, June 13 and October 29, 1984. Dorchester responded to the agency's request on July 2, 1985, but the record suggests that the response was insufficient. Awaiting the information, the agencies took no further action on Dorchester's applications.

In 1986, American Shield Coal Company became the owner of the leases after its parent company acquired Dorchester's parent company. American Shield acknowledged the problems with the mine plans submitted by Dorchester and informed the cooperating agencies that "[w]e expect to supply fully engineered responses to the outstanding adequacy issues for all three leases within ninety days." By 1988, however, American Shield had not supplied the necessary information. In fact, the company notified the BLM that because of a poor coal market, it was withdrawing the permits and would not proceed with development of the leases. Thereafter, American Shield failed to post the bonds required by the BLM. The agency notified American Shield of the default and warned that failure to cure would result in the federal leases being canceled.

Aware of American Shield's action (or inaction) regarding the leases, Plaintiff became concerned with the fate of his royalty interest in the leases. Accordingly, he met with BLM officials to discuss the options available to protect his interests. The record suggests that the BLM and Plaintiff decided Plaintiff could assume the leases from American Shield, cure the defaults, and seek a suspension of the lease until Interior could conduct an environmental impact statement and Plaintiff could complete the necessary mine permits. Although BLM officials made no guarantees, the record suggests that, at a minimum, they expressed optimism that the suspension would be granted. ³ Furthermore, both the BLM and Plaintiff apparently knew that it would be impossible to bring the leases into production before the diligent development deadline in the absence of a suspension.

On April 3, 1989, Plaintiff requested that BLM transfer title to the leases to him. Shortly thereafter, on April 6, 1989, he requested a suspension of the lease under §§ 39 and 7(b) of the Mineral Leasing Act 30 U.S.C. §§ 207(b) & 209. BLM notified Plaintiff that he was responsible for surety bonds to guarantee annual rental payments and an additional $50,000 cash reclamation bond. After several requests for extensions, Plaintiff met BLM's bonding requirements on December 20, 1989. BLM then processed Plaintiff's application requesting transfer of the leases and on January 1, 1990 transferred the leases to Plaintiff and Wilde. On January 22, 1990, BLM notified Plaintiff that it was reviewing his application for lease suspensions under §§ 39 and 7(b) of the Mineral Leasing Act. BLM issued its decision denying plaintiff's suspension request on August 21, 1990.

BLM offered several reasons for the denial. First, BLM concluded that even if the suspension were granted, that Plaintiff's proposed mine plan would not enable him to meet the diligent development requirement....