State of Tex. v. Secretary of Interior

• Citation: 580 F. Supp. 1197
• Decision Date: 15 February 1984
• Docket Number: Civ. A. No. B-79-476-CA.
• Parties: STATE OF TEXAS v. SECRETARY OF the INTERIOR, et al.
• Court: U.S. District Court — Eastern District of Texas

580 F. Supp. 1197

STATE OF TEXAS v. SECRETARY OF the INTERIOR, et al.

Civ. A. No. B-79-476-CA.

United States District Court, E.D. Texas, Beaumont Division.

February 15, 1984.

Hubert Oxford of Benckenstein, Oxford, Radford & Johnson, Beaumont, Tex., for State of Tex.

Margret Strand, Washington, D.C., for Dept. of Interior.

MEMORANDUM OPINION AND ORDER

ROBERT M. PARKER, District Judge.

This case concerns distribution of lease revenue derived from certain federal, offshore lands situated in the Gulf of Mexico. The State of Texas and the Department of Interior are the primary litigants. The parties agree that Section 1337 of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. ?? 1331-1356, is controlling in this case. More specifically, they agree that Section 1337¹ provides a standard for distribution of the lease revenue in question. They do not, however, agree regarding the correct construction of that standard or its application to the lease sales involved in this case. No other court has passed on the issues this Court confronts today.

Of central importance to this litigation, Section 8(g), as amended by the Outer Continental Shelf Lands Act Amendment of 1978² designated as a distinct area federal offshore lands lying within three miles of the seaward boundaries of the coastal states. Conceptually, two separate zones comprise federal, offshore lands; first, the 8(g) zone, i.e., the inner most three mile strip of federal offshore land which lies immediately adjacent to state owned offshore lands, and second, the non-8(g) zone, i.e., federal, offshore lands lying seaward of the 8(g) zone.

In addition to creating the 8(g) zone, the 1978 Amendment provided both procedural and substantive guidelines for leasing tracts located in the 8(g) zone. In brief, these provisions require the following: at the time the Secretary solicits nominations for lease bids³ on tracts within the 8(g) zone, he must provide relevant geographical, geological and ecological information to the Governors of those coastal states which own offshore lands adjacent to the federal lands being nominated.⁴ Moreover, the Secretary must offer the Governor of the relevant coastal state an opportunity to enter into an agreement concerning disposition of revenue generated by federal leasing of tracts in the 8(g) zone if they contain at least one oil or gas pool or field common to both federal and state lands. The Governor then has 90 days within which to decide whether to accept the offer. Even if no such agreement can be reached, the Secretary may lease the federal tracts. But, he must deposit in a separate treasury account all lease revenues attributable to tracts in the 8(g) zone which contain an oil or gas pool common to both federal and state submerged lands. Thereafter, if the Secretary and Governor still are unable to agree upon the proper distribution of lease revenue, the matter may be submitted to a United States' district court for a determination of "the fair and equitable disposition of such revenues and any interest which has accrued and the proper rate of payments to be deposited in the treasuries of the Federal government and the coastal state." 43 U.S.C. ? 1337(g)(4).

The dispute which gave rise to the instant litigation arose almost immediately after Congress amended the OCSLA in 1978. In September, 1978, the Secretary proposed a lease sale which included several tracts located within the 8(g) strip adjacent to Texas, but later withdrew these tracts from the sale when requested to do so by the Governor of Texas. Subsequently, the Secretary included the previously withdrawn 8(g) tracts in the list of tracts comprising two other proposed lease sales which were scheduled for July and November, 1979. Prior to the actual lease sales, in April and June of 1979, the parties pursued resolution of their differences through negotiation. As the date designated for the first of these lease sales drew near, still unable to reach an agreement with the Secretary, Texas filed suit seeking to enjoin Lease Sale 58⁵. After reviewing the briefs and hearing argument on Texas' Motion for a Temporary Restraining Order, this Court denied Texas' request, but retained jurisdiction in the case.⁶ Lease Sale 58 proceeded on schedule. The Secretary did, however, deposit all lease revenue attributable to tracts located within the 8(g) strip in a separate treasury account. Again the parties attempted to resolve their differences through negotiation but again they failed. Accordingly, as provided by section 8(g), this Court must now determine the fair and equitable disposition of revenue attributable to tracts lying within the 8(g) zone.

Central to the parties' dispute is their conflict regarding interpretation of the legal standard contained in Section 8(g). Section 8(g)(4) provides in its entirety:

Notwithstanding any other provision of this subchapter, the Secretary shall deposit in a separate account in the Treasury of the United States all bonuses, royalties, and other revenues attributable to oil and gas pools underlying both the outer Continental Shelf and submerged lands subject to the jurisdiction of any coastal State until such time as the Secretary and the Governor of such coastal State agree on, or if the Secretary and the Governor of such coastal State cannot agree, as a district court of the United States determines, the fair and equitable disposition of such revenues and any interest which has accrued and the proper rate of payments to be deposited in the treasuries of the Federal Government and such coastal State (emphasis added).

Essentially, Texas argues that the statutory language requires a district court to engage in a broad review, i.e., a totality of the circumstances type examination, to determine what is a "fair and equitable" distribution of revenue. By contrast, the Secretary urges this Court to conclude that the statute mandates a far more limited role for a district court, that the "fair and equitable" standard is based upon a single factor; i.e., drainage?€”production of State resources through wells drilled by federal leases. At stake in this litigation is over one billion dollars of lease revenue attributable to tracts in the 8(g) zone.⁷

Because construction of the fair and equitable standard is a question of law, defendant, on October 16, 1981, filed a Motion for Partial Summary Judgment. By an order entered October 14, 1981, this Court granted defendant's motion, in part, and carried the remaining questions with the trial. On October 23, 1981, plaintiff filed a Motion to Reconsider the Court's Order of October 14, 1981. After thoroughly reviewing the parties' motions and supporting briefs, the voluminous legislative history, the statute, and after nine days of trial, the Court has concluded that disposition of federal lease revenue, pursuant to Section 8(g)(4), is not limited to compensation for drainage. Accordingly, plaintiff's Motion to Reconsider is granted, and lease revenue attributable to tracts in the 8(g) zone shall be distributed as set forth in the Court's Findings of Fact.

I. History and Experience⁸

The roots of this long and labyrinthine litigation extend to several seemingly remote events which took place at mid-century. During the first forty-five years of this century, coastal states exercised jurisdiction over offshore mineral resources. California, Texas, and Louisiana all executed leases permitting development and production of offshore oil and gas resources. This changed, however, when in 1945, by Proclamation and Executive Order,⁹ President Truman asserted exclusive federal jurisdiction over all "the natural resources of the subsoil and sea bed of the continental shelf ... contiguous to the coasts of the United States ...."¹⁰ Over the next eight years ownership of offshore lands changed hands three times?€”from State to Federal and, in part, back again.

Unwilling to accept the impact of exclusive federal jurisdiction over offshore mineral resources?€”e.g., reduction in state revenues, loss of control over activity which affects state landscapes and seascapes?€” coastal states challenged the Truman Proclamation in court. Three times between 1947 and 1950, the Supreme Court rejected state claims to offshore mineral resources. In United States v. California, 332 U.S. 19, 67 S.Ct. 1658, 91 L.Ed. 1889 (1947), the first case in which it confronted federal-state conflicts over ownership of offshore resources, the Supreme Court held "that the Federal Government rather than the State has paramount rights in and power over the continental shelf ..., an incident to which is full dominion over the resources of the soil under that water area, including oil." Id. at 38-39, 67 S.Ct. at 1668. In two 1950 decisions, the Court extended the California rationale to lands underlying the Gulf of Mexico off the coasts of Texas and Louisiana. United States v. Texas, 339 U.S. 707, 70 S.Ct. 918, 94 L.Ed. 1221 (1950); United States v. Louisiana, 339 U.S. 699, 70 S.Ct. 914, 94 L.Ed. 1216 (1950). These rulings effectively eviscerated coastal states' claims to ownership of offshore resources.

Not satisfied with the Supreme Court's tripartite judicial rebuke, the Coastal States carried their cause into the political arena. The Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. ? 1331, and the Submerged Lands Act (SLA), 43 U.S.C. ?? 1301-1315, represent the political solution to the dispute over ownership of offshore lands which by 1953 had been labeled the Tidelands controversy. The SLA embodies a Congressional determination that the public interest required "title to and ownership of the lands beneath navigable waters within the boundaries of the respective States, to be ... vested in and assigned to the respective States ...."¹¹ Thus, incident to their statutorily vested ownership, the States acquired "the right and power to manage, administer, lease, develop, and use ... the submerged land and its natural...