Trapper Min. Inc. v. Lujan, s. 89-1372

• Decision Date: 15 January 1991
• Docket Number: Nos. 89-1372,90-8025,s. 89-1372
• Citation: 923 F.2d 774
• Parties: TRAPPER MINING INC., Plaintiff-Appellant, v. Manuel LUJAN, Jr., Neil Morck, Bruce Harris, and R.W. Mullin, Defendants-Appellees. WYODAK RESOURCES DEVELOPMENT CORP., Plaintiff-Appellee, v. Manuel LUJAN, Jr., Secretary of the Department of Interior; and William H. Lee, Chief, Branch of Mining Law and Solid Minerals, Wyoming State Office Bureau of Land Management, United States Department of the Interior, Defendants-Appellants.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 774

923 F.2d 774

TRAPPER MINING INC., Plaintiff-Appellant, v. Manuel LUJAN, Jr., Neil Morck, Bruce Harris, and R.W.

Mullin, Defendants-Appellees.

WYODAK RESOURCES DEVELOPMENT CORP., Plaintiff-Appellee, v. Manuel LUJAN, Jr., Secretary of the Department of Interior; and William H. Lee, Chief, Branch of Mining Law and Solid

Minerals, Wyoming State Office Bureau of Land Management,

United States Department of the Interior, Defendants-Appellants.

Nos. 89-1372, 90-8025.

United States Court of Appeals Tenth Circuit.

Jan. 15, 1991.

Richard L. Fanyo (Sasha A. Karpov, with him on the briefs), of Welborn Dufford Brown & Tooley, P.C., Denver, Colo., for plaintiff-appellant Trapper Mining Inc.

Evelyn Ying, Dept. of Justice (Myles E. Flint, Deputy Asst. Atty. Gen., Martin W. Matzen and Jean A. Kingrey, Dept. of Justice, Steve Brown and Lyle Rising, Dept. of the Interior, Washington, D.C., with her on the brief), Washington, D.C., for defendants-appellees Manuel Lujan, Jr., et al.

Evelyn Ying, Dept. of Justice (George W. Van Cleve, Acting Asst. Atty. Gen., Martin W. Matzen and Jean A. Kingrey, Dept. of Justice, Steve Brown and Lyle Rising, Dept. of the Interior, Washington, D.C., with her on the briefs), Washington, D.C., for defendants-appellants Manuel Lujan, Jr., et al.

Timothy L. Thomas of Morrill Brown & Thomas, Rapid City, S.D., for plaintiff-appellee Wyodak Resources Development Corp.

Before LOGAN and MOORE, Circuit Judges, and GREENE, District Judge. ^*

JOHN P. MOORE, Circuit Judge.

In this consolidated appeal, the question before us is whether the Federal Coal Leasing Amendments Act (FCLAA) automatically converts the twenty-year readjustment interval in pre-FCLAA coal leases to ten-year intervals at the first post-FCLAA readjustment date. In a suit brought by Trapper Mining Inc., the United States District Court for the District of Colorado concluded that it does. Faced with the identical issue in a suit brought by Wyodak Resources Development Corp., the United States District Court for the District of Wyoming reached the opposite result, holding that the Secretary of the Interior must adopt the new interval through a readjustment. We affirm the judgment of the Colorado District Court and reverse the judgment of the Wyoming District Court.

I. FACTUAL AND LEGAL BACKGROUND

The United States, acting through the Bureau of Land Management (BLM) and the Secretary of the Interior (the Secretary), granted coal leases to Trapper Mining Inc.'s predecessor in interest ¹ on June 1, 1958, and to Wyodak Resources Development Corp. on May 1, 1959. The leases provided for twenty-year intervals at which the Secretary could readjust terms, qualified by the clause "unless otherwise provided by law." Section 3(d) of each lease reserves to the lessor

[t]he right reasonably to readjust ... 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 unless otherwise provided by law at the time of the expiration of any such period.

The introductory paragraph of the leases also incorporates Sec. 7 of the Mineral Lands Leasing Act (MLLA) of 1920, as amended, 30 U.S.C. Sec. 207 (1958), which provided similarly that the leases

shall be for indeterminate periods upon condition ... that at the end of each 20-year period succeeding the date of the lease such readjustment of terms and conditions may be made as the Secretary of the Interior may determine, unless otherwise provided by law at the time of the expiration of such periods.

In 1976, Congress amended the law, replacing Sec. 7 of MLLA with Sec. 6 of FCLAA. One of the changes instituted by Sec. 6 is a shorter readjustment interval of ten years. Section 6 provides in part that

rentals and royalties and other terms and conditions of the lease will be subject to readjustment at the end of its primary term of twenty years and at the end of each ten-year period thereafter if the lease is extended.

The first scheduled readjustment opportunities for Trapper's and Wyodak's leases occurred in 1978 and 1979, respectively, the twentieth anniversaries of the leases. The BLM failed to take advantage of either of these opportunities, sending untimely notice to Trapper in 1979 and never sending actual changes in terms and conditions to Wyodak despite timely notice. The BLM subsequently notified Trapper and Wyodak (lessees) that their leases would be readjusted in 1988 and 1989, respectively, ten years after the twentieth anniversaries of the leases. The lessees objected that the ten-year interval cannot apply to their leases because the Secretary did not adopt it through a readjustment at the previous opportunities.

After the BLM and Interior Board of Land Appeals (IBLA) rejected their complaints, the lessees filed suits for declaratory and injunctive relief to prevent readjustment until 1998 and 1999. On cross-motions for summary judgment, the Colorado District Court dismissed Trapper's case in a bench ruling. However, the Wyoming District Court granted Wyodak's requested relief, also on cross-motions for summary judgment.

II. STANDARD OF REVIEW

When a matter comes to us after summary judgment, we apply the same standards employed by the trial court under Fed.R.Civ.P. 56(c). Osgood v. State Farm Mut. Auto. Ins. Co., 848 F.2d 141, 143 (10th Cir.1988). Since no material factual disputes exist, we consider de novo which party is entitled to judgment as a matter of law.

Section 706 of the Administrative Procedure Act, 5 U.S.C., provides the basis for our review of the Secretary's actions. We "decide all relevant questions of law," setting aside agency determinations if they are "not in accordance with the law" or are "in excess of statutory jurisdiction, authority, or limitations."

III. APPLICATION OF FCLAA

This dispute concerns the proper readjustment interval for pre-FCLAA leases, absent a readjustment by the Secretary at the first post-FCLAA opportunity. We have never faced this combination of circumstances before, but we have examined the readjustment interval and the effect of FCLAA on pre-FCLAA leases in other contexts.

In Rosebud Coal Sales Co. v. Andrus, a lease was due for readjustment in 1975 and the Secretary improperly attempted to readjust it two and one-half years later in 1977. We held that the Secretary waives his readjustment opportunity by failing to act, precluding readjustment until the next scheduled opportunity. 667 F.2d 949, 952 (10th Cir.1982). The twenty-year readjustment interval gave "a right to the Government in the nature of an option to make adjustments it considers necessary or to let the opportunity pass.... The opportunity comes at intervals albeit long but so prescribed by Congress." Id. at 951.

We also established in Rosebud that FCLAA cannot apply to pre-FCLAA leases via pre-FCLAA readjustment opportunities. The passage of FCLAA in 1976, one year after the scheduled readjustment, did not justify the Secretary's belated action as an effort to make the lease conform to FCLAA. Such a result would amount to a retroactive application of FCLAA which Congress never intended. Id. at 952.

Our next encounter with FCLAA's application to pre-FCLAA leases arose when the Secretary sought to apply FCLAA on post-FCLAA readjustment dates. In companion cases, we held that the Secretary not only can but also must impose FCLAA's mandatory terms at post-FCLAA readjustment opportunities. FMC Wyoming Corp. v. Hodel, 816 F.2d 496 (10th Cir.1987), cert. denied, 484 U.S. 1041, 108 S.Ct. 772, 98 L.Ed.2d 859 (1988); Coastal States Energy Co. v. Hodel, 816 F.2d 502 (10th Cir.1987). In FMC, we reasoned first that the language "unless otherwise provided by law" in the original leases left the Secretary's right to readjust subject to later statutory changes by Congress. Then we noted that Sec. 6 of FCLAA, in effect when FMC's leases came up for readjustment, required a royalty rate of not less than 12 1/2%. We concluded that the Secretary had no choice but to impose a minimum royalty rate of 12 1/2%. FMC, 816 F.2d at 501. We arrived at the same result in Coastal for other terms mandated by FCLAA, including the change in readjustment interval. However, the same analysis yielded a different result for the underground coal royalty rate. Section 6 excepts underground coal from the mandatory 12 1/2% rate. Therefore, the Secretary erred in automatically applying an 8% rate without even considering a lesser one. Coastal, 816 F.2d at 508.

Tenth Circuit precedent thus establishes (1) when the Secretary waives a pre-FCLAA readjustment opportunity, he cannot arbitrarily choose the next readjustment interval, and (2) when the Secretary undertakes a post-FCLAA readjustment of a pre-FCLAA lease, he must adopt the readjustment interval prescribed by Congress in FCLAA.

The question before us now is whether FCLAA's ten-year readjustment interval takes effect automatically when the Secretary waives the first post-FCLAA readjustment opportunity. Applying the same two-step reasoning we used in FMC and Coastal, we conclude that Congress has the authority to change the readjustment interval by statute and exercised that authority in FCLAA. The Secretary was thus entitled to readjust Trapper's leases in 1988 and Wyodak's in 1989.

A. Congressional Authority to Alter Interval

The lease agreements between the government and the lessees created commercial relationships governed by contract law. Rosebud, 667 F.2d at 951. Congress is entitled to modify such contracts through subsequent legislation unless the right is " 'surrendered in unmistakable terms.' " Bowen v. Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52, 106 S.Ct. 2390, 2397, 91 L.Ed.2d 35 (1986) (citing Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148, 102 S.Ct. 894, 907, 71 L.Ed.2d 21 (1982)). The Supreme Court has repeatedly warned that interpretations of contracts which would immunize them from the sovereign power...