Rosebud Coal Sales Co., Inc. v. Andrus, 80-1842

• Citation: 667 F.2d 949
• Decision Date: 08 January 1982
• Docket Number: No. 80-1842,80-1842
• Parties: ROSEBUD COAL SALES COMPANY, INC., Plaintiff-Appellee, v. Cecil D. ANDRUS, Secretary of the Department of the Interior, et al., Defendants-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

Page 949

667 F.2d 949

ROSEBUD COAL SALES COMPANY, INC., Plaintiff-Appellee, v. Cecil D. ANDRUS, Secretary of the Department of the Interior, et al., Defendants-Appellants.

No. 80-1842.

United States Court of Appeals Tenth Circuit.

Argued and Submitted July 13, 1981.

Decided Jan. 8, 1982.

Jerry Jackson, Atty., Appellate Section, Land and Natural Resources Div., U. S. Dept. of Justice, Washington, D. C. (Sanford Sagalkin, Deputy Asst. Atty. Gen., Anthony C. Liotta, Acting Asst. Atty. Gen., Dirk D. Snel and Margaret M. McMahon, Attys., U. S. Dept. of Justice, Washington, D. C., with him on the briefs), for defendants-appellants.

William E. Murane, of Holland & Hart, Denver, Colo. (Marilyn S. Kite, of Holland & Hart, Laramie, Wyo., Kenneth D. Hubbard, Gerald J. Schissler, Paul D. Phillips, and Julian M. Izbiky, of Holland & Hart, Denver, Colo., with him on the briefs), for plaintiff-appellee.

Russell S. Jones, Denver, Colo., for amicus curiae Beaver Creek Coal Co.

Robert G. Holt, of Martineau, Rooker, Larsen & Kimball, Salt Lake City, Utah, for amicus curiae Eureka Energy Co.

Hugh C. Garner and William B. Prince, Salt Lake City, Utah, for amicus curiae Franklin Real Estate Co.

M. William Tilden, of Gresham, Varner, Savage, Nolan & Tilden, San Bernardino, Cal., for amicus curiae Kaiser Steel Corp.

Russell H. Carpenter, Jr. and David N. Heap, Washington, D. C., for amicus curiae Rocky Mountain Energy Co.; Kenneth R. Oldham, Broomfield, Colo., and Covington & Burling, Washington, D. C., of counsel.

Before SETH, Chief Judge, McWILLIAMS, Circuit Judge, and BROWN, District Judge ^*.

SETH, Chief Judge.

The plaintiff sought review of an administrative decision by the Interior Board of Land Appeals which held that the Department of Interior could readjust the terms of a coal lease issued to a predecessor of plaintiff at a time after the anniversary date of the lease. The United States District Court for the District of Wyoming held that the lease could not then be readjusted and reversed the decision of the Interior Board of Land Appeals. The issue came before the trial court on cross motions for summary judgment. The Department of Interior has taken this appeal.

The issue is a narrow one, and presents the question whether by a notice given about two and one-half years after the anniversary date the Department has authority to exercise a right given it under the Mineral Leasing Act to readjust the terms of a coal lease. The lease is C-057086 issued by the Department of Interior dated April 5, 1935 covering about two sections of land in Carbon County, Wyoming. Coal leases at that time were issued for an indeterminate term and contained a provision that at the end of each twenty-year period succeeding the date of the lease the Secretary of Interior could readjust the terms, royalties and conditions.

We apply the typical scope of review to the agency action, Ballard E. Spencer Trust, Inc. v. Morton, 544 F.2d 1067 (10th Cir.), and agree with the trial court as to the proper content of the administrative record. The Interior Board of Land Appeals made no factual determination and no evidentiary hearing was held.

Section 3 of the coal lease in issue provides in part:

"It is mutually understood and agreed that the lessor shall have the right to readjust and fix the royalties payable hereunder and other terms and conditions at the end of 20 years from the date hereof, and thereafter at the end of each succeeding 20-year period during the continuance of this lease...."

A time is thus stated when the Government can "readjust" the royalty and other terms-at the end of each twenty-year period. This provides a right to the Government in the nature of an option to make adjustments it considers necessary or to let the opportunity pass. The scope or nature of the changes is not limited and there thus exists a very broad power to make changes considered to be in accordance with the proper administration of the lands. This opportunity comes at intervals albeit long but so prescribed by Congress. The Secretary, of course, need not take any action at all under the lease provisions.

As might be expected, the lease adopted the statutory language of the Mineral Lands Leasing Act (30 U.S.C. § 207). The Act then provided that the Secretary of Interior could readjust the terms of the lease "at the end of each twenty-year period succeeding the date of the lease." It is apparent that the lease incorporates the provisions of the Act in any event.

The regulations applicable to coal leases before and on April 5, 1975, which date marked the end of the second twenty-year period of the lease, had a like provision (43 C.F.R. § 3522.2-1, 1974):

"Coal, potassium and phosphate leases are issued subject to readjustment of the terms and conditions of the lease at the end of each 20-year period succeeding the date of the lease.... The lessee will be notified of the proposed readjustment of terms or notified that no readjustment is to be made.... Notice of the proposed readjustments will be given, whenever feasible, before the expiration of each such 20-year period."

The time set for readjustment by the regulations was thus again "at the end of each 20-year period." The regulation added the provision as to notice, an item not included in the contract nor in the Act. The "anniversary date" as used herein means the end of each twenty-year period following the date of the lease.

The lease agreement was entered into by the Department in administering the public lands. United States v. Essley, 284 F.2d 518 (10th Cir.). The lease and the transactions in connection therewith created a commercial relationship. United States v. Ohio Oil Co., 163 F.2d 633 (10th Cir.). The Secretary, before the trial court, asserted that he was seeking in this transaction to "deal realistically in a business context." We should, as did the trial court, consider the entire contract in the context suggested by the Secretary. We must also consider the entire contract in the context of the Mineral Leasing Act and the regulations. In United States v. Essley, 284 F.2d 518 (10th Cir.), in determining the meaning of an oil and gas lease issued under the Mineral Lands Leasing Act, we used the typical contract law doctrines applicable to commercial transactions. See also United States v. Seckinger, 397 U.S. 203, 90 S.Ct. 880, 25 L.Ed.2d 224, and In Re Murdock Mach. & Eng. Co. of Utah, 620 F.2d 767 (10th Cir.).

In so considering all the contract provisions, and in an application of the ordinary meaning to the terms, it is not difficult to reach the conclusion that the readjustment was to be when each twenty-year period expired, on that date and not at a later time. The statement of time "at the end of" on its face is not susceptible to any variation as it is a precise time. Furthermore, as mentioned above, it is presented as an option to the Government to make the changes it considers necessary or not to act at all. Since such broad discretion is given, and considering the nature of the mining business, it might be expected that the time to act was precisely fixed and set at infrequent intervals. There is no legislative history to suggest any variation on the ordinary meaning nor to indicate that a fixed time provision was not to be considered of the essence. It was a provision selected by Congress and repeated from time to time.

We thus fully agree with the trial court's...