State of Louisiana v. United States

• Decision Date: 19 December 1986
• Docket Number: Civ. A. No. 86-0924 "L".
• Citation: 656 F. Supp. 1310
• Court: U.S. District Court — Western District of Louisiana
• Parties: STATE OF LOUISIANA, ex rel. William J. GUSTE, Jr., Attorney General, v. The UNITED STATES of America; the Secretary of the Interior; the Director of the Minerals Management Service; and Samedan Oil Corporation.

656 F. Supp. 1310

STATE OF LOUISIANA, ex rel. William J. GUSTE, Jr., Attorney General, v. The UNITED STATES of America; the Secretary of the Interior; the Director of the Minerals Management Service; and Samedan Oil Corporation.

Civ. A. No. 86-0924 "L".

United States District Court, W.D. Louisiana, Lafayette-Opelousas Division.

December 19, 1986.

William J. Guste, Jr., Atty. Gen., Gary L. Keyser and Mary Ellen Leeper, Asst. Attys. Gen., Baton Rouge, La., for plaintiff.

Lawrence Moon, Asst. U.S. Atty., Lafayette, La., for USA and Director of the Mineral Management Service.

Lawrence E. Donohoe, Robert K. Reeves, Randall C. Songy, Patrick G. Tracey, Jr. and R. Thomas Jordan, Jr., Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Lafayette, La., for Samedan Oil Corp.

Charles W. Findlay, Lisa Hemmer and Poe Legette, U.S. Dept. of Justice, Washington, D.C., for Land and Natural Resources Div.

George W. Hardy, III, Michael R. Mangham and Louis R. Davis, Broadhurst, Brook, Mangham & Hardy, Lafayette, La., for Cashco Oil Co.

L. Todd Gremillion, Dotson, Babcock & Scofield, Houston, Tex., and Andrew L. Gates, III, Dotson, Babcock & Scofield, Lafayette, La., for Seneca Resources Corp.

B.J. Duplantis, Gordon, Arata, McCollam, Stuart & Duplantis, Lafayette, La., for Pelto Oil Co.

OPINION

DUHE, District Judge.

A celebrated observer of American government once wrote "scarcely any political question arises in the United States that is not resolved, sooner or later, into a judicial question." de Tocqueville, Democracy In America 280 (1956 ed.). The validity of that comment, penned more than one hundred and fifty years ago, is demonstrated by this case. This Court is called upon to resolve a suit brought by the State of Louisiana against the United States, the Secretary of the Interior, the Director of the Minerals Management Service (collectively "Federal Defendants"), and Samedan Oil Corporation ("Samedan"). The dispute concerns the depletion of an allegedly common hydrocarbon pool, underlying both state and federal submerged lands. Despite the attention of Congress and both Executives, this issue — involving the allocation of potentially billions of dollars of resource generated revenues — now rests before this court on a motion for summary judgment.

Finding no issue of material fact, I am prepared to rule on the outstanding substantive issues. For the reasons outlined below, I hold that monies paid to Louisiana under the 1986 amendments to § 8(g) of the Outer Continental Shelf Lands Act ("OCSLA"), 43 U.S.C. § 1331 et seq.,¹ are intended to compensate the state for federal drainage of common hydrocarbon reservoirs. Accordingly, the Secretary of the Interior has no duty under § 8(g) to enter into a unitization or royalty sharing agreement to compensate states for drainage losses.² I find that Louisiana's acceptance of funds under § 8(g) forecloses any claim for drainage losses.

I further rule that an alleged 1975 policy agreement between the sovereigns provides no basis for this action. Additionally, I find no basis in the doctrine of correlative rights to enjoin Samedan's production of hydrocarbons.

This holding terminates the litigation in this Court. Accordingly, the outstanding nondispositive motions are moot, except for the motion of plaintiff, the State of Louisiana, and plaintiffs-intervenors, Cashco Oil Company ("Cashco"), Seneca Resources Corporation ("Seneca"), and Pelto Oil Company ("Pelto") to permit disclosure of protected materials to MGF Corporation ("MGF"). That motion is denied.

FACTS

West Delta Block 18 is a rectangular tract of ocean approximately fifteen miles east southeast of Grand Isle, Louisiana. This area is divided by a line established by the United States Supreme Court in United States v. State of Louisiana, 422 U.S. 13, 95 S.Ct. 2022, 44 L.Ed.2d 652 (1975). The line was drawn parallel to the Louisiana coastline, three miles offshore.³ The Submerged Lands Act of 1953, ch. 65, 67 Stat. 29 (codified at 43 U.S.C. § 1301 et seq.), recognized in Louisiana the power to manage, lease, and develop the seabed inside the decree line. The Secretary of the Interior has authority to manage, lease, and develop areas seaward of the line. 43 U.S.C. § 1334(a).⁴

In July, 1983 Samedan acquired a federal lease in West Delta Block 18. This lease, designated OCS-G-5669, is adjacent to State Lease 10088, held by Cashco, Seneca, and Pelto. Samedan completed three wells on its lease and began producing hydrocarbons. The state's lessees also completed producing wells on their leasehold.

Louisiana and its lessees conducted studies which indicated that the penetrated hydrocarbon reservoirs underlay both state and federal lands. Consequently, the State believed that Samedan's wells, allegedly in a structurally advantageous position, were draining gas from beneath State acreage. The defendants contested this claim. The State calculated that 84% of the total recoverable reserves underlay State lands, and that Samedan's position and production rates would permit the recovery of a disproportionate share of the allegedly common pool. Additionally, the State contended that Samedan's "excessive production rate" would ultimately decrease the total amount of hydrocarbons recovered.

In April, 1986 the State became aware of Samedan's intent to install compression equipment on its wells to increase production, which would aggravate the migration of hydrocarbons. Accordingly, the State filed this suit seeking declaratory and injunctive relief.

The State and its lessees ask for an injunction to: (1) limit defendant Samedan's rate of production "consistent with that proportion of recoverable gas reserves underlying the federal portion of the affected reservoirs," and (2) directing the Secretary of the Department of the Interior to negotiate with the state to achieve unitization of the affected reservoirs.

Plaintiffs also seek a declaratory judgment that the defendants have violated the following: (1) the OCSLA, in particular, 43 U.S.C. § 1337(g) ("§ 8(g)"), as amended by the Comprehensive Omnibus Budget Reconciliation Act of 1986; (2) "an agreed and established policy arising from an informal agreement between the Minerals Management Service ("MMS"), through its predecessor, the United States Geological Survey ("USGS"), and the State of Louisiana, through representatives of the Louisiana State Mineral Board and the Louisiana Department of Conservation; and (3) the correlative rights of the State of Louisiana and its mineral lessees under Louisiana law, allegedly applicable under 43 U.S.C. § 1333(a)(2)(A), or alternatively, under applicable federal law.

Federal jurisdiction is predicated on 28 U.S.C. §§ 1331, 1361, 2201, and 43 U.S.C. § 1349(a)(3) and (b)(1).

CURRENT POSTURE

As a preliminary note, the Court finds the existence of a common reservoir to be a disputed issue of fact. However, resolution of that controversy is not material to the disposition of this case.

On May 20, 1986 this Court denied the plaintiffs' motion for a preliminary injunction.⁵ Subsequently, the Federal Defendants moved for partial summary judgment on two issues: (1) that payments made pursuant to the 1986 amendments to § 8(g) were legislatively intended to compensate Louisiana for drainage claims; and (2) that the parties never entered into a binding agreement concerning regulatory principles.

Samedan, by separate motion, raised the same issues as the Federal Defendants, and additionally sought summary judgment on the plaintiffs' correlative rights claim. This was followed by the Federal Defendants' motion to dismiss drainage claims for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2).

Finally, numerous nondispositive motions were filed, including a motion to strike the plaintiffs' exhibits for failure to comply with Fed.R.Civ.P. 56(e). All outstanding motions were consolidated for oral argument on November 10, 1986.

Federal Defendants' jurisdictional challenge is mislabeled. The basis for dismissal is that Louisiana's acceptance of payment under the 1986 amendments to the OCSLA constitutes a waiver of any damage claim as a matter of law. In accordance with the basic philosophy of the federal rules, the substance of a 12(b) motion controls over form. 5 Wright & Miller, Federal Practice and Procedure, § 1347, n. 99 (1969). Accordingly, we construe this filing as a motion to dismiss for failure to state a claim under Fed.R.Civ.P. 12(b)(6).⁶

LAW AND ANALYSIS

In considering these questions, a preliminary issue was raised by Samedan's motion to strike numerous exhibits attached to the plaintiffs' memorandum in opposition to summary judgment. Samedan does not contest the authenticity of these exhibits, but bases its objection on the plaintiffs' failure to certify the documents as required by Fed.R.Civ.P. 56(e).

In light of the fact that all of the exhibits referred to were produced, authored, or received by one of the defendants, I find the motion to strike to be meritless. Literal compliance with Rule 56(e) serves no purpose under these circumstances. Cf. Lawson v. American Motorists Insurance Corporation, 217 F.2d 724, 726 n. 3 (5th Cir.1954) (idle formality to require immaterial documents to conform to Rule 56(e)). The consideration of these motions incorporated all evidence and arguments advanced by the parties.

I. THE LEGISLATIVE INTENT

This dispute can be distilled to two issues. Did Congress intend compensation under § 8(g)(2) of the amended OCSLA to incorporate drainage losses? Did Congress also grant the Secretary of the Interior unbridled discretion to refuse to negotiate a unitization or royalty sharing agreement under § 8(g)(3)? The answers must be drawn from both the text and context of the legislation.

Justice Cardozo described statutory construction as a choice between uncertainties. Burnet v. Guggenheim, 288 U.S. 280, 288, 53 S.Ct. 369, 372, 77 L.Ed. 748 (1933). However, I believe that a...