Texas Oil and Gas Corp. v. Watt

• Citation: 683 F.2d 427
• Decision Date: 11 June 1982
• Docket Number: Nos. 80-2297,80-2302,s. 80-2297
• Parties: TEXAS OIL AND GAS CORPORATION, Appellant, v. James G. WATT, Secretary of the United States Department of the Interior. (Twocases)
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 427

683 F.2d 427

221 U.S.App.D.C. 108

TEXAS OIL AND GAS CORPORATION, Appellant, v. James G. WATT, Secretary of the United States Department of

the Interior. (Twocases)

Nos. 80-2297, 80-2302.

United States Court of Appeals, District of Columbia Circuit.

Argued Nov. 2, 1981.

Decided June 11, 1982.

Appeals from the United States District Court for the District of Columbia (D.C. Civil Action Nos. 79-02976 and 80-00488).

Bradley D. Jesson, Fort Smith, Ark., and Craig R. Carver, Denver, Colo., with whom John A. Carver, Jr., Denver, Colo., James W. McDade, Washington, D. C., Jason Warran, and Marilyn R. Saint-Just were on the briefs, for appellant.

Jerry Jackson, Atty., Dept. of Justice, Washington, D. C., with whom Jacques B. Gelin, Atty., Dept. of Justice, Washington, D. C., was on the brief, for appellee. James W. Moorman, Kay L. Richman, and Edward J. Shawaker, Attys., Dept. of Justice, Washington, D. C., also entered appearances for appellee.

Alan S. Novins, Washington, D. C., with whom Martin Lobel, Lee Ellen Helfrich, Washington, D. C., and Robert Roberts, III, Shreveport, La., were on the brief, for amicus curiae, Arkla Exploration Co., urging affirmance in No. 80-2297.

Before ROBB and MIKVA, Circuit Judges, and LUMBARD, ^* Senior Circuit Judge for the Second Circuit.

Opinion for the Court filed by Circuit Judge MIKVA.

MIKVA, Circuit Judge:

This case involves appeals by Texas Oil & Gas Corp. ("TXO") from judgments of the district court upholding a decision of the Secretary of the Interior that cancelled oil and gas leases issued to TXO for parcels of land at Fort Chaffee, Arkansas; rejected TXO's outstanding lease applications for lands at Malmstrom Air Force Base in Montana; and declared a moratorium on oil and gas leasing of all lands acquired by the federal government for military or naval purposes. TXO challenges the district court's decisions with respect to all three elements of the Secretary's action. With regard to the cancellation of TXO's leases and the rejection of its applications, we reverse. The issue concerning the leasing moratorium has become moot, so we do not address it.

I. BACKGROUND

The statutory scheme for leasing federal government lands is somewhat complex. Congress first authorized mineral exploration and development of government lands in 1920, when it gave the Secretary discretionary authority to open "public domain lands" to leasing. Act of Feb. 25, 1920, ch. 85, 41 Stat. 437 (current version at 30 U.S.C. §§ 181-263 (1976)). Public domain lands, or public lands, means lands claimed by the United States as part of its national sovereignty. It was not until 1947 that Congress authorized mineral leasing on lands "acquired" by the federal government from private owners for various public purposes. Act of Aug. 7, 1947, ch. 513, 61 Stat. 913 (current version at 30 U.S.C. §§ 351-359 (1976)) ("Mineral Leasing Act for Acquired Lands" or "MLAA"). Under the 1947 legislation, "lands acquired by the United States ... (and) set apart for military or naval purposes" were excluded from leasing. Id. § 352. Under both statutes oil and gas leasing could be conducted by means of competitive bidding if the lands were within a known oil and gas field, or noncompetitively where the land, if leased at all, was to be leased to the first qualified applicant at $1.00 per acre per year (plus royalties if any oil or gas was found).

Pursuant to the military exclusion in the Mineral Leasing Act for Acquired Lands, the regulations of the Department of the Interior ("Interior") tracked the exclusion and prohibited any mineral leasing on military lands. 43 C.F.R. § 3101.2-1(f) (1976). In 1976 Congress removed the exclusion from the statute, thus making military lands subject to leasing at the Secretary's discretion. Federal Coal Leasing Amendments Act of 1975, § 12(a), Pub.L.No. 94-377, 90 Stat. 1090 (codified at 30 U.S.C. § 352 (1976)) ("the 1976 Amendments"). ¹ For the time being, Interior did nothing to alter its regulation as it had existed prior to the congressional action of 1976.

In May of 1977, some nine months after the 1976 Amendments, TXO, the appellant in this case, filed applications with Interior's Bureau of Land Management ("BLM") for noncompetitive oil and gas leases on lands at Fort Chaffee in Arkansas and Malmstrom Air Force Base in Montana. It was not until four months after TXO had filed its applications that the BLM began the process of changing its pre-1976 regulation that had tracked the statutory prohibition on leasing military lands. The BLM published a notice of proposed rulemaking in the Federal Register (hereinafter, "the 1977 Notice"), which proposed to alter Regulation 3101.2-1 to reflect the 1976 Amendments. 42 Fed.Reg. 46,558 (1977). The 1977 Notice announced in its "Summary" section that the proposed rule would "authorize the Department of the Interior to lease lands acquired for military or naval purposes," id., and that amending § 3101.1 "would reflect the authority granted the Department by section 12(a) of the Federal Coal Leasing Amendments Act of 1975 .... This regulation would increase the amount of land available for oil and gas leasing," id. In addition, the following statement was made under the heading "Supplementary Information:"

Section 12(a) of the Federal Coal Leasing Amendments Act of 1975 ... repealed the prohibition against the leasing proposed here. The regulatory prohibition reflecting the old statutory provision remains in effect, serving as an exercise of the Secretary's new authority to lease or not to lease such deposits.

Id. The amendment to the regulation itself became effective in September 1978, see 43 Fed.Reg. 37,202 (1978).

Notwithstanding the 1977 Notice, which would seem to have frozen any such leasing until the rulemaking was completed, the BLM proceeded to process TXO's applications. In July 1979, the company received twenty out of thirty-eight leases sought at Fort Chaffee. ² The Malmstrom Air Force Base applications initially were denied, ³ but they were held for further consideration and a final decision with regard to them was pending during the summer of 1979.

The grant of the twenty leases at Fort Chaffee generated some negative publicity, as well as a "protest" from another company, Arkla Exploration Company (Arkla). ⁴ From August to October, 1979, a number of Senators contacted then-Secretary of the Interior Andrus to express their dissatisfaction with the BLM's noncompetitive mineral leasing procedures in general and with the grant of the Fort Chaffee leases in particular. ⁵ See Letters to Secretary Andrus from Senator Bumpers, August 8 and 10 and September 14, 1979, Appendix (App.) to No. 80-2297, at 90, 92, 101; from Senators Jackson, Ford, Bumpers, and Bellmon, September 13, 1979, id. at 95; from Senators Jackson, Bumpers, and Bellmon, September 17, 1979, id. at 103; from Senator Long, October 1, 1979, id. at 106; from Senators Long and Johnston, October 25, 1979, id. at 107. ⁶ In his responses to these communications, Secretary Andrus indicated that he, too, was not satisfied with the way noncompetitive leasing was being carried out. He stated, however, that the TXO leases had been granted in accordance with law:

Until 1976, there was no authority to lease, either competitively or noncompetitively, acquired lands within the boundaries of military reservations. Section 12 of the Federal Coal Leasing Amendments Act of 1975 amended section 3 of the Mineral Leasing Act for Acquired Lands (30 U.S.C. 351, 352) to permit oil and gas leasing on such lands and because of energy needs, there were efforts made to pursue such leasing. As a result, the lands within Fort Chaffee were open to application for noncompetitive leases just like other acquired lands. In May of 1977, the Texas Oil and Gas Company filed approximately 50 such applications for land within the Fort. Thirty of the applications were either rejected or withdrawn by the company because either 1) the Army refused to permit leasing, 2) it was determined that there were no Federal mineral interests within the application area or 3) the USGS had identified the areas as a KGS (Known Geological Structure). Because the company was the first qualified applicant on the other 20 lease applications and the lands were not qualified as a KGS, leases were issued by the Bureau of Land Management on these tracts according to routine procedures of the noncompetitive leasing system.

In summary, these leases were issued pursuant to law as part of a program which was functioning on a regular basis.

Letter from Secretary Andrus to Senator Bumpers, August 13, 1979, App. to No. 80-2297, at 68, 68-69.

On September 20, 1979, Secretary Andrus issued a memorandum to the Director of the U. S. Geological Survey, instructing him to review earlier geological determinations with regard to TXO's Fort Chaffee applications and not to approve any applications for drilling permits on the lands leased to TXO. See App. to No. 80-2297, at 118. The company interpreted this move as a concession to political pressure and began to fear that the Secretary would attempt to rescind the Fort Chaffee leases. Consequently TXO sought a temporary restraining order in the district court on November 1, 1979, so as to prevent the Secretary from ordering such a rescission.

The application for a TRO was set for oral argument on November 2, 1979. On the evening of November 1, however, Secretary Andrus issued a decision in which he cancelled the twenty Fort Chaffee leases and rejected all pending applications for leases on lands acquired for military or naval purposes that had been filed prior to September 21, 1978, the effective date of the new Department regulation tracking the 1976 amendment to the MLAA. See App. to No. 80-2297, at 139, 140-41. In addition, he declared a moratorium on the leasing of all acquired military and naval lands, pending a full reevaluation of the noncompetitive leasing procedures....