Watt v. Energy Action Educational Foundation

• Decision Date: 01 December 1981
• Docket Number: No. 80-1464,80-1464
• Parties: James G. WATT, Secretary of the Interior, et al., Petitioners, v. ENERGY ACTION EDUCATIONAL FOUNDATION et al
• Court: U.S. Supreme Court

454 U.S. 151

102 S.Ct. 205

70 L.Ed.2d 309

James G. WATT, Secretary of the Interior, et al., Petitioners,

v ENERGY ACTION EDUCATIONAL FOUNDATION et al.

No. 80-1464.

Argued Oct. 5, 1981.

Decided Dec. 1, 1981.

Syllabus

Under the Outer Continental Shelf Lands Act of 1953 (Act), the Secretary of the Interior (Secretary) is authorized to lease tracts of the Outer Continental Shelf (OCS) for the exploration for, and development of, mineral resources, including oil and gas. As originally passed, the Act authorized the Secretary, in his discretion, to solicit bids either by fixing a royalty rate of not less than 121/2%, and requiring bids on an initial "cash bonus" to be paid when the lease was awarded, or by fixing the amount of the cash bonus, and requiring bids on the royalty rate. In practice, virtually all tracts were leased on the basis of a fixed royalty, with bidding on the amount of the cash bonus. However, the Outer Continental Shelf Lands Act Amendments of 1978 (1978 Amendments) increased the number of authorized bidding systems to 10, retaining the original system and authorizing new systems, some of which also involve cash bonus bidding, while others use a factor other than the cash bonus as the bidding variable. The 1978 Amendments direct the Secretary to develop a 5-year plan of experimentation with the new systems, requiring him to experiment with the bidding systems other than the traditional cash bonus, fixed royalty system in not less than 20% but not more than 60% of the total area offered for leasing each year, unless he determines that those percentage requirements are inconsistent with the 1978 Amendments' purposes. The 1978 Amendments assure ongoing congressional oversight of the Secretary's leasing activities by requiring frequent reports to Congress. To date, the Secretary has used two of the nontraditional bidding systems in leases covering 49% of the total area offered. However, he has not experimented with any of the systems using a factor other than the size of a cash bonus as the bidding variable. Respondents, including the State of California, brought suit for declaratory and injunctive relief, alleging, inter alia, that the Secretary has abused his discretion by failing to experiment with systems that do not use the size of a cash bonus as the bidding variable. The District Court denied both parties' motions for summary judgment, but the Court of Appeals held, inter alia, that the 1978 Amendments require the Secretary to ex- periment with at least some of the bidding systems that do not use the size of a cash bonus as the bidding variable.

Held:

1. California has standing to challenge the Secretary's choice of bidding systems. Because the 1978 Amendments require the Federal Government to turn over a fair share of the revenues of an OCS lease to the neighboring coastal State whenever the Federal Government and the State own adjoining portions of an OCS oil and gas pool, California has a direct financial stake in federal OCS leasing off the California coast. In alleging that the bidding systems currently used by the Secretary are incapable of producing a fair market return, California asserts the kind of "distinct and palpable injury" that is required for standing. And California also satisfies the requirement that there be a "fairly traceable" causal connection between the injury it claims and the conduct it challenges, so that if the relief sought is granted, the injury will be redressed. Pp. 160-162.

2. The Court of Appeals erred in compelling the Secretary to experiment with non-cash-bonus bidding systems. Pp. 162-169.

(a) Nothing in the 1978 Amendments suggests that Congress, in committing the Government to the goal of obtaining fair market value for OCS oil and gas resources, intended to channel the Secretary's discretion in choosing among the alternative bidding systems, and nothing in the statute singles out the non-cash-bonus systems for special consideration. The language of the 1978 Amendments requires experimentation with at least some of the new bidding systems, but leaves the details to the Secretary's discretion. Pp. 162-165.

(b) Nor does the legislative history of the 1978 Amendments compel the conclusion that the Congress as a whole intended to limit the Secretary's discretion to choose among the various experimental bidding systems. When viewed in context, unfavorable references to "cash bonus" bidding show congressional dissatisfaction with large front-end payments associated with the traditional cash bonus bid, fixed royalty system then in effect, not with all forms of cash bonus bidding. Pp. 165-168.

210 U.S.App.D.C. 20, 654 F.2d 735, reversed.

Louis F. Claiborne, Washington, D.C., for petitioners.

John Silard, Washington, D.C., for respondents.

Justice O'CONNOR delivered the opinion of the Court.

We are asked to review a decision of the United States Court of Appeals for the District of Columbia Circuit compelling the Secretary of the Interior to experiment with the use of certain statutorily defined bidding systems in awarding leases for oil and gas exploration and development on the Outer Continental Shelf. Because the decision below incorrectly construes the Outer Continental Shelf Lands Act Amendments of 1978, 92 Stat. 629, 43 U.S.C. § 1331 et seq. (1976 ed. and Supp.III), we reverse.

I

The Outer Continental Shelf Lands Act of 1953 (OCS Lands Act), 67 Stat. 462, as amended, 92 Stat. 629, 43 U.S.C. § 1331 et seq. (1976 ed. and Supp. III), authorizes the Secretary of the Interior to lease tracts of the Outer Continental Shelf (OCS) ¹ for the exploration and development of mineral resources, including oil and gas. As originally passed, the OCS Lands Act authorized the Secretary to solicit sealed bids either by fixing a royalty rate of not less than 121/2%, and requiring bids on the amount of an initial "cash bonus" to be paid at the time the lease was awarded, or by fixing the amount of the cash bonus, and requiring bids on the royalty rate. 43 U.S.C. § 1337(a). The OCS Lands Act vested complete discretion in the Secretary to choose between these two bidding systems. In practice, prior to 1978 virtually all tracts were leased on the basis of a fixed royalty of 162/3% of the gross value of production, with bidding on the amount of the cash bonus. See H.R.Rep.No.95-590, p. 138 (1977); S.Rep.No.95-284, p. 72 (1977), U.S. Code Cong. & Admin. News 1978, p. 1450.

During the mid-1970's, the Nation's increasing dependence on imported oil focused public attention on the OCS as a potential source of domestic petroleum and natural gas. See H.R.Rep.No.95-590, supra, at 53-54. At the same time, the traditional OCS bidding procedures came under close scrutiny because dramatic increases in petroleum prices made existing cash bonuses seem miserly relative to the revenues generated from wells on OCS leaseholds. Members of Congress began to express reservations about the ability of the traditional cash bonus, fixed royalty system to assure a fair return to the Government, principally because it appeared that only the major oil companies could risk paying a large cash bonus to lease a tract of unknown value. Because the number of bidders was often limited to a handful of giant concerns, competition for the leases seemed tepid, and there was no assurance that the ultimate return to the Government was adequate. See, e. g., id., at 47, 54.

Responding to these and other pressures for modernization of the OCS Lands Act, Congress passed the Outer Continental Shelf Lands Act Amendments of 1978 (1978 Amendments), Pub.L.95-372, 92 Stat. 629.² Through the 1978 Amendments, Congress sought to experiment with alternatives to the traditional bidding system. To this end, it in- creased the number of authorized bidding systems from 2 to 10, 43 U.S.C. § 1337(a)(1) (1976 ed., Supp. III), and directed the Secretary of the Interior to develop a 5-year plan of experimentation with the new systems. §§ 1337(a)(5)(B), 1344. Four of the newly authorized systems use a cash bonus bid (including the cash bonus, fixed royalty system, which was specifically retained in § 1337(a)(1)(A)),³ three use a royalty rate bid,⁴ one uses a "profit-share" bid,⁵ and two use a "work-commitment" bid.⁶

Although the 1978 Amendments, like the original OCS Lands Act, give the Secretary of the Interior the discretion to select among the various authorized bidding systems, that discretion is no longer total. The statute now requires the Secretary to experiment with the nine non-traditional systems in "not less than 20 per centum and not more than 60 per centum of the total area offered for leasing each year," § 1337(a)(5)(B), unless he determines that those percentage requirements are "inconsistent with the purposes and policies" of the 1978 Amendments.⁷

The 1978 Amendments assure ongoing congressional oversight of the Secretary of the Interior's leasing activities by requiring frequent reports to Congress on the operation of the bidding systems. For example, the Secretary of Energy, who has responsibility for issuing regulations governing OCS bidding,⁸ must report within six months of the end of each fiscal year "with respect to the use of [the] various bidding options," including, "if applicable, the reasons why a particular bidding system has not been or will not be utilized." § 1337(a)(9). In addition, the Secretary of the Interior must submit each fiscal year a report that includes "an evaluation of the competitive bidding systems permitted under [the 1978 Amendments], and, if applicable, the reasons why a particular bidding system has not been utilized," as well as "an evaluation of alternative bidding systems not per- mitted under [the 1978 Amendments], and why such system or systems should or should not be utilized." §§ 1343(2)(A) and (B).

To date, the Secretary of Energy has issued regulations for a number of the bidding systems, including three of the four systems using cash bonus bidding, 10 CFR §§...