New West Materials v. Interior Bd. of Land Appeals

• Decision Date: 28 October 2005
• Docket Number: No. 05CV403.,05CV403.
• Citation: 398 F.Supp.2d 438
• Parties: NEW WEST MATERIALS LLC, and JWR, INC. Plaintiffs, v. INTERIOR BOARD OF LAND APPEALS, and Bureau of Land Management Defendants.
• Court: U.S. District Court — Eastern District of Virginia

398 F.Supp.2d 438

NEW WEST MATERIALS LLC, and JWR, INC. Plaintiffs, v. INTERIOR BOARD OF LAND APPEALS, and Bureau of Land Management Defendants.

No. 05CV403.

United States District Court, E.D. Virginia, Alexandria Division.

October 28, 2005.

Dennis Carl Barghaan, Jr., U.S. Atty's Office, Alexandria, VA, for Bureau of Land Management.

Thomas Phillip Mains, Jr., Great Falls, VA, for JWR, Inc.

David William O'Brien, Crowell & Moring, LLP, Washington, DC, for New West Materials, LLC.

MEMORANDUM OPINION

ELLIS, District Judge.

At issue in this Administrative Procedure Act¹ ("APA") suit for review of final agency action is whether the reservation of "oil, gas, and all other mineral deposits" in the Small Tract Act of 1938² ("STA") encompasses sand and gravel.

I.³

Because this dispute involves the interpretation of the STA's mineral reservation, a brief recitation of the STA's history and pertinent provisions is in order at the outset.

The STA, originally passed in 1938, authorized the Secretary of the Interior to sell or lease five acre tracts of public lands,⁴ "which the Secretary may classify as chiefly valuable as a home, cabin, camp, health, convalescent, recreational, or business site." STA 52 Stat. 609 (1938). The sales or leases were to be accomplished under "such rules and regulations as [the Secretary] may prescribe." Id. In addition, the STA required the patents under which land was sold to contain a reservation to the United States of the "oil, gas, and other mineral deposits, together with the right to prospect for, mine, and remove the same under such regulations as the Secretary may prescribe." Id.

When the STA was amended in 1954, the permissible purposes for which the Secretary could sell the land were expanded to include "residence, recreation, business, or community site purposes." 68 Stat. 239. The statute was amended in order to: (i) expand the category of uses for which the Secretary could sell or lease STA land to include community site purposes, such as municipal, religious or educational purposes, (ii) simplify the STA's administration, and (iii) allow the Secretary to dispose of unsurveyed lands through the STA. New West, 164 IBLA at 134 (citing H.Rep.No. 2212, 80th Cong. 2nd Sess., June 4 1948, to accompany H.R. 5555, at 2). The STA's mineral reservation was unchanged except for the addition of the word "all" before the words "other mineral deposits." As amended in 1954, therefore, the STA's mineral reservation granted to the United States the "oil, gas and all other mineral deposits" on land sold or leased pursuant to the STA.

Approximately twenty years after the amendment, in 1976, the STA was repealed when Congress passed the Federal Land Policy and Management Act of 1976 ("FLPMA"). Importantly, however, the FLPMA expressly preserved the rights of the United States under the STA's mineral reservation provision. See 43 U.S.C. § 1701 (2005).

The current dispute involves an 82 acre tract of land ("subject land") conveyed by the United States in 1959 via patent deeds to several private owners in separate parcels approximately five acres in size. Pursuant to the STA the patent deeds reserved the mineral rights to the United States.⁵ At the time of the conveyance, the subject land was essentially desert and it remained in this state and vacant for roughly forty years when, in August 2000, plaintiff JWR, Inc. ("JWR") acquired the individual parcels comprising the subject land from private owners.

The subject land is located in Maricopa County, Arizona, approximately 20 miles from downtown Phoenix, and extends along the Agua Fria River channel. River channels constitute an important source for aggregate materials such as sand and gravel because the sand and gravel is typically cleaner and less cemented. Accordingly, and in light of the continued expansion of metropolitan Phoenix, JWR entered into a lease agreement with plaintiff New West Materials ("New West") in October 2000 for the express purpose of New West's extraction of sand and gravel from the subject lands.⁶ The record reflects that New West's subsequent mining operation has extracted over 2.5 million tons of sand and gravel from two large mining pits, which are 20 to 28 feet deep, and cover an area of 268,000 square feet or roughly six and one half acres.

On November 1, 2001, defendant Bureau of Land Management ("BLM"), an agency of the U.S. Department of the Interior ("DOI"), asserted ownership on behalf of the United States of the sand and gravel found on the subject land by virtue of the mineral reservation clause of the STA and the patent deed. According to the BLM, New West was not authorized to remove the sand and gravel without the approval of the DOI and an associated BLM material sales contract. In addition to the mineral reservation clause of the STA, the BLM based its notice on the statutory authority of the DOI Secretary,⁷ and DOI regulations which forbid the removal of materials from "public lands" except as permitted by the DOI.⁸ The BLM's interpretation of the mineral reservation was informed by the Supreme Court's decision in Watt v. Western Nuclear, Inc., 462 U.S. 36, 103 S.Ct. 2218, 76 L.Ed.2d 400 (1983), which interpreted a similar reservation of "all coals and other minerals" in the Stock-Raising Homestead Act of 1916 ("SRHA"), 39 Stat. 862, repealed by 90 Stat. 2744 (1976), to include gravel.

On November 21, 2001, New West responded to the BLM's trespass notice, noting its disagreement with the BLM's interpretation of the STA and asserting its right to continue extracting sand and gravel from the subject lands. On January 3, 2002, the BLM issued a notice of trespass to New West and JWR for the unauthorized removal of the sand and gravel. This notice of trespass stated that the alleged trespass was non-willful. On February 1, 2002 New West and JWR appealed the BLM's trespass determination to the defendant Interior Board of Land Appeals ("IBLA") pursuant to the regulations set forth in 43 C.F.R. § 4.411.⁹ Throughout 2002, the parties filed briefs contesting the legal issue before the IBLA.¹⁰

While the appeal to the IBLA was pending, the Supreme Court issued its opinion in BedRoc Ltd. LLC v. United States, 541 U.S. 176, 124 S.Ct. 1587, 158 L.Ed.2d 338 (2004), interpreting a reservation of "all the coal and other valuable minerals in the lands so entered and patented" contained in the Pittman Underground Water Act of 1919¹¹ ("Pittman Act") as not encompassing sand and gravel. Central to the Supreme Court's decision was the fact that the reservation applied only to "valuable" minerals, which, according to the Court, did not include sand and gravel at the time the Pittman Act was passed. BedRoc, 541 U.S. at 184, 124 S.Ct. 1587. Thereafter, on May 4, 2004, the IBLA requested supplemental briefing from the parties discussing the Supreme Court's decision pursuant to its authority under 43 C.F.R. 4.1. The parties submitted their initial briefs in June 2003 and their responses in July 2003.

On December 2, 2004, the IBLA upheld the BLM's trespass determination in a written decision in New West Materials, 164 IBLA 126 (2004). In doing so, a majority of the three administrative judge panel relied on five primary arguments: (i) inferences drawn from the DOI's contemporaneous regulations governing the disposition of the minerals contained in the STA, Id. at 130-32, (ii) the amendment of the mineral reservation in 1954 to include the modifier "all," Id. at 133-34, (iii) the similarities between the STA's reservation and the mineral reservation of the Stock-Raising Homestead Act of 1916, construed by the Supreme Court in Watt v. Western Nuclear, 462 U.S. 36, 103 S.Ct. 2218, 76 L.Ed.2d 400 (1983), as encompassing gravel, Id. at 135, (iv) the protection afforded to the surface estate owners by the DOI regulations, Id. at 136, and (v) the "established rule that land grants are construed favorably to the Government." Id. (quoting United States v. Union Pacific R. Co., 353 U.S. 112, 116, 77 S.Ct. 685, 1 L.Ed.2d 693 (1957)). The third administrative judge dissented, chiefly on the ground that a reservation of sand and gravel on the five acre tracts envisioned by the STA would destroy the surface estate, and deprive the surface estate owner of the substance of his bargain without compensation. Id. at 143-45. The dissent also argued that the presumption in favor of the United States does not apply where, as in the case of the STA, the land is transferred by sale or lease and not by grant. Id. at 147.

On January 28, 2005 New West filed a motion for reconsideration pursuant to 43 C.F.R. § 4.403, arguing that because this was an issue of first impression, and given the decision's significant impact on public land law more generally, "extraordinary circumstances" existed warranting reconsideration.¹² The IBLA denied New West's petition for reconsideration in March 2005, explaining that New West had misread both the STA and the IBLA's decision, and that New West had not shown the "extraordinary circumstances" necessary to warrant reconsideration. The dissenting administrative judge noted that the Petition for Reconsideration had raised new arguments that ought to be addressed, and reaffirmed his position that the panel had decided the issue incorrectly in the first instance. Both the initial decision of IBLA upholding the BLM's trespass determination, as well as the denial of New West's petition for reconsideration constitute final agency action pursuant to 5 U.S.C. § 704.

Having exhausted its avenues for relief with the agency, New West filed the present suit on April 11, 2005, seeking judicial review of the IBLA's decision and a declaration that the IBLA's decision is arbitrary and contrary to law pursuant to the Court's authority under 5 U.S.C. § 706(a)(2). Additionally, New West seeks a further declaration that the United States, acting through the BLM, has no ownership interest in the sand and gravel of the subject...