Murphy Exploration v. US. Dept. of Interior

• Citation: 252 F.3d 473
• Decision Date: 19 June 2001
• Docket Number: No. 00-5218,00-5218
• Parties: (D.C. Cir. 2001) Murphy Exploration and Production Company, Appellant v. United States Department of the Interior and Gale A. Norton, Appellees
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

Page 473

252 F.3d 473 (D.C. Cir. 2001)

Murphy Exploration and Production Company, Appellant v. United States Department of the Interior and Gale A. Norton, Appellees

No. 00-5218

United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 8, 2001

Decided June 19, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court for the District of Columbia (No. 99cv00570)

Stephen M. McNabb argued the cause for appellant. With him on the briefs was L. Poe Leggette.

Ronald M. Spritzer, Attorney, U.S. Department of Justice, argued the cause for appellees. With him on the brief were Lois J. Schiffer, Assistant Attorney General, and Jeffrey Dobbins, Attorney.

Before: Ginsburg, Sentelle and Rogers, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Dissenting opinion filed by Circuit Judge Rogers.

Sentelle, Circuit Judge:

Murphy Exploration and Production Co. ("Murphy") appeals the District Court's dismissal, for lack of jurisdiction, of its claim that the Department of the Interior ("DOI") failed to reimburse it for mining royalty overpayments. Murphy's lawsuit invokes the Federal Oil and Gas Royalty Simplification and Fairness Act ("FOGRSFA"), which confers jurisdiction on courts to consider challenges to "administrative proceedings" that the agency fails to resolve within 33 months after they are commenced. Murphy proposes that it commenced such an "administrative proceeding" when it submitted a refund request to DOI. Because we conclude that FOGRSFA's 33-month deadline period begins to run when a party submits a refund request, we hold that the district court erroneously concluded that it lacked jurisdiction to hear Murphy's claim.

I. BACKGROUND

Several acts of Congress confer on DOI the authority to issue leases to mining companies that wish to extract minerals from lands administered by the federal government. See, e.g., the Mineral Leasing Act, 30 U.S.C. 181 et seq., the Mineral Leasing Act for Acquired Lands, 30 U.S.C. 351 et seq., and the Outer Continental Shelf Lands Act, 43 U.S.C. 1331 et seq. As a condition of their leases, lessees must pay the government royalties based on the value of the minerals they produce.

In response to a series of court decisions between 1988 and 1998, DOI's Minerals Management Service ("MMS") altered the method it uses to calculate the royalties that producers must pay when they extract gas from its lands. See Diamond Shamrock Exploration Co. v. Hodel, 853 F.2d 1159 (5th Cir. 1988); Independent Petroleum Ass'n of Am. v. Babbitt, 92 F.3d 1248 (D.C. Cir. 1996); In re Century Offshore Mgmt. Corp., 111 F.3d 443 (6th Cir. 1997). Royalties now are based on a company's "gross proceeds." A gas producer's "gross proceeds" include "buydowns" (moneys paid by a purchaser to reduce the price at which gas covered by an initial contract will be sold in the future), but do not include "buyouts" (payments by a gas purchaser to terminate a contract), or "take-or-pay payments" (payments a purchaser is obliged to make even if it does not take the gas it contracted to buy). Mobil Exploration and Producing U.S., Inc., MMS-94-0151OCS (1998); Antelope Prod. Co., MMS-96-0068-O&G (1998).

A producer may challenge an MMS order to pay royalties in two ways. First, it may pursue an administrative appeal. 30 C.F.R. Pt. 290. Second, the producer is entitled to immediate judicial review if the agency fails to resolve the royalties dispute timely. The latter type of challenge is authorized by FOGRSFA. Enacted in 1996, FOGRSFA requires DOI's Secretary to "issue a final decision in any administrative proceeding, including any administrative proceedings pending on August 13, 1996, within 33 months from the date such proceeding was commenced or 33 months from August 13, 1996, whichever is later." 30 U.S.C. 1724(h)(1). If the Secretary fails to do so within the allotted time, she "shall be deemed to have issued a final decision in favor of the Secretary ... and the appellant shall have a right to judicial review of such deemed final action in accordance with Title 5." Id. 1724(h)(2)(B). FOGRSFA further defines "administrative proceeding" as "any Department of the Interior agency process in which a demand, decision or order issued by the Secretary ... is subject to appeal or has been appealed." Id. 1702(18). In other words, DOI's failure to resolve an "administrative proceeding" relating to a royalties dispute within 33 months triggers the right to immediate judicial review.

In 1999, DOI promulgated regulations interpreting FOGRSFA's 33-month deadline. 64 Fed. Reg. 26,240 (1999). As the agency sees it, 1724(h)'s reference to "any administrative proceedings" includes only administrative appeals--or, to say the same thing, the 33 months begin to run only when a party files a notice of appeal with the agency. "For appeals involving Federal oil and gas leases covered by this new provision, DOI has 33 months from the date a proceeding is commenced to complete all levels of administrative review." Id. at 26,240 (emphasis added). If DOI fails to "decide the appeal within 33 months, the appeal is deemed decided for or against DOI, depending on the type of order and the monetary amount at issue in the appeal." Id. (emphasis added). FOGRSFA's deadline is not triggered, for example, "on the date that an MMS order is received by the recipient." Id. at 26,248.

On February 3, 1989, Murphy--a producer that holds oil and gas leases on a number of DOI-administered lands-submitted a refund request claiming that the agency owed it some $4.1 million for past royalty overcharges. Murphy's claim was not resolved for nearly ten years. On November 3, 1998, MMS issued an order instructing Murphy to pay it nearly $368,000 in outstanding royalties. The agency determined that Murphy had overpaid by nearly $990,000 on certain contracts, but that it owed $1.3 million in royalties on certain others. Murphy appealed administratively on December 4, 1998.

On March 5, 1999, with its administrative appeal still pending, Murphy challenged the November 3 order in the United States District Court for the District of Columbia. Murphy's lawsuit cited FOGRSFA for the proposition that DOI's failure to resolve timely its refund request was a final agency action entitling it to immediate judicial review. Because, Murphy argued, its refund request set in motion an "agency process" that could result in the Secretary issuing "a demand, decision or order" that "is subject to appeal," 30 U.S.C. 1702(18), it therefore was an "administrative proceeding" within the meaning of FOGRSFA. And because its request had been pending for more than 33 months when the statute was enacted, the company was entitled to immediate judicial review. Murphy also argued that, even assuming the validity of DOI's interpretation of the statute, it was entitled to immediate judicial review of one portion of its refund request--a December 1993 DOI order that it had appealed and that the agency later rescinded. Finally, Murphy argued that, quite apart from FOGRSFA, the expiration of nearly ten years from the filing of its refund request to DOI's November 1998 order constituted an unreasonable delay under Telecommunications Research & Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984).

The district court on January 27, 2000 dismissed Murphy's suit for lack of jurisdiction, on the grounds that FOGRSFA's 33-month deadline had not yet expired. Murphy Exploration & Prod. Co. v. Dep't of the Interior, No. 99-570 (D.D.C. Jan. 27, 2000). The court analyzed the statute according to the two-step framework established in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984). At step one, the court found FOGRSFA to be ambiguous on the question whether a refund request (or any other proceeding that is not an appeal) is one of the "any administrative proceedings" that triggers the statute's 33-month deadline. Because "Congress cannot be said to have spoken directly to the specific issue at hand," the court proceeded to step two and deferred to DOI's interpretation that FOGRSFA's 33-month period applies only to administrative appeals. Murphy Exploration, slip op. at 13. The court also rejected Murphy's alternative claim that the passage of ten years since it filed its refund request was an unreasonable delay, and hence a reviewable action: "[w]hile the ten-year delay in this case is indeed worrisome, it does not constitute final agency action." Id. at 10.

II. ANALYSIS

A. Procedural issues

DOI identifies two procedural hurdles which it contends prevent this Court from considering Murphy's argument that the district court had jurisdiction to hear its suit. Both are easily cleared. The agency first claims that Murphy did not preserve this issue for appeal since its complaint did not expressly dispute the lawfulness of DOI's regulations. In fact, Murphy's claim that the district court had jurisdiction is properly before us. The complaint's failure to specifically attack the regulations is irrelevant, since Murphy's suit was not a facial challenge. Rather, the company sought an order to compel DOI to refund what it claimed were royalties overpayments. It was not until the agency challenged the district court's jurisdiction--on the grounds that FOGRSFA's 33-month deadline had not yet expired--that the validity of the regulations became an issue. In response to DOI's motion to dismiss, Murphy explained its view that, agency regulations notwithstanding FOGRSFA gives it the right to immediate judicial review. Murphy therefore has preserved this issue for appeal.

DOI further proposes that Murphy waived its challenge to the agency's interpretation of FOGRSFA because it did not advance that view during the rulemaking process. To be sure, in Ohio v. EPA, 997 F.2d 1520 (D.C. Cir. 1993), we declined to consider an argument that the parties had waived "by failing to raise it during rulemaking proceedings before the agency." Id. at 1528. But Ohio...