Western Energy Co. v. U.S. Dept. of Interior

• Decision Date: 08 May 1991
• Docket Number: No. 90-35356,90-35356
• Citation: 932 F.2d 807
• Parties: WESTERN ENERGY COMPANY, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF the INTERIOR, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 807

932 F.2d 807

WESTERN ENERGY COMPANY, Plaintiff-Appellant, v. UNITED STATES DEPARTMENT OF the INTERIOR, et al Defendants-Appellees.

No. 90-35356.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 6, 1991.

Decided May 8, 1991.

James A. Poore, III, Poore, Roth & Robinson, Butte, Mont., for plaintiff-appellant.

Evelyn S. Ying, Appellate Section, Environment & Natural Resources Div., U.S. Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the District of Montana; Paul G. Hatfield, District Judge.

Before WIGGINS, BRUNETTI and NELSON, Circuit Judges.

THOMAS G. NELSON, Circuit Judge:

In this appeal from a judgment of the district court upholding the Secretary of the Interior's amendments to Western Energy Company's coal lease, we hold that the 1976 amendments to the Mineral Lands Leasing Act of 1920 apply to leases issued prior to 1976. In doing so, we join with the courts of appeals for the District of Columbia Circuit and the Tenth Circuit.

I. BACKGROUND

The Tenth and D.C. Circuits have decided four cases on the issues related to the effect of the 1976 amendment to the Mineral Lands Leasing Act (MLLA). ¹ Since we basically agree with the conclusions of the courts in those cases, it is not necessary to unduly burden the libraries of the country with extensive independent discussion of the issues.

The background of the legislation involved in these cases has been explained by the D.C. Circuit in Western Fuels-Utah:

The Mineral Lands Leasing Act of 1920 ("MLLA"), 41 Stat. 437 (1920) (codified as amended at 30 U.S.C. Secs. 181-287), authorized the Secretary of the Interior to lease federal lands for coal production. The Act dictated certain mandatory provisions to be included in the leases it authorized; in particular, it required that each lease provide for payment by the lessee of a royalty of not less than five cents per ton of coal extracted. Sec. 7, 41 Stat. at 439. The Act provided that the term of a coal mining lease would be indeterminate, upon condition of diligent development and continued operation of the mine, and upon the further condition that "at the end of each twenty-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." Id.

In 1976, Congress enacted the Federal Coal Leasing Amendments Act of 1976, 90 Stat. 1083 (1976) (codified as amended at scattered sections of 30 U.S.C.). Among the several concerns that led Congress to amend the MLLA was the low royalty lessees were paying for publicly owned coal. See H.R.Rep. No. 681, 94th Cong., 2d Sess. 17, reprinted in 1976 U.S.Code Cong. & Admin.News 1943, 1953 [hereinafter 1976 House Report] ("the public is being paid a pittance for its coal resources"). Accordingly, Congress amended Sec. 7 of the MLLA, 30 U.S.C. Sec. 207, to provide:

A coal lease shall be for a term of twenty years and for so long thereafter as coal is produced annually in commercial quantities from that lease.... A lease shall require payment of a royalty in such amount as the Secretary shall determine of not less than 12 per centum of the value of coal as defined by regulation, except the Secretary may determine a lesser amount in the case of coal recovered by underground mining operations. The lease shall include such other terms and conditions as the Secretary shall determine. Such 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.

895 F.2d at 782 (emphasis in original).

Appellant Western Energy Company (Western) is a wholly owned subsidiary of the Montana Power Company and the holder of the 1966 lease at issue. The lease contains the following language:

Sec. 3. The lessor expressly reserves:

* * * * * *

(d). Readjustment of Terms

The right reasonably to readjust and fix royalties payable hereunder and other terms and conditions at the end of twenty years from the date hereof ... unless otherwise provided by law at the expiration of any such period....

Approximately two years before the end of the initial twenty-year period, the Bureau of Land Management (BLM) of the Department of the Interior gave notice to Western that it intended to readjust the lease terms and conditions. At Western's request, representatives of BLM met with representatives of Western to discuss the terms of the readjustment. Consistent with the other cases cited here, BLM took the position that the 1976 amendments required that existing leases be readjusted to meet the Federal Coal Leasing Amendments Act's (FCLAA) minimum terms. Western received a readjusted lease which, among other things, increased the royalty rate of 20 per ton to 12.5 percent of the value of the coal mined and shortened the readjustment period from successive twenty-year periods to ten years. Western timely pursued its administrative remedies through the Department of Interior and was unsuccessful. Western filed a timely action in the district court pursuant to 28 U.S.C. Sec. 1331 and here challenges the district court's decision upholding the Secretary's readjustment of the terms of the lease. This court has jurisdiction under 28 U.S.C. Sec. 1291.

II. STANDARD OF REVIEW

This court reviews de novo the district court's grant of summary judgment. Norfolk Energy, Inc. v. Hodel, 898 F.2d 1435, 1439 (9th Cir.1990). Western seeks review of the Secretary of Interior's readjustment decision pursuant to 5 U.S.C. Sec. 706(2)(A). This court will not overturn such an agency decision unless it is "arbitrary, capricious, an abuse of discretion, or contrary to law." Norfolk Energy, 898 F.2d at 1439. We review Western's claims that its constitutional rights were violated de novo. United States v. Savinovich, 845 F.2d 834 (9th Cir.1988), cert. denied, 488 U.S. 943, 109 S.Ct. 369, 102 L.Ed.2d 358 (1988).

III. THE 1920 ACT

Western's challenge to the readjustment of the terms of its lease is quite similar, but not identical, to the challenges of the leaseholders considered in the previously cited decisions of the other circuits. Western has approached the interpretation issue in the reverse order from that advanced in the other courts, where the courts first reached the issue of the intent of the Congress in enacting the 1976 FCLAA amendments to MLLA. However, the parties in those cases did advance the basic proposition which Western espouses here: that the intent of Congress in 1920 controls. The Western Fuels-Utah court disposed of the contention as follows:

The appellants also argue that the 1976 FCLAA must be read in light of the history of federal coal leasing since 1920, and that the 1976 Congress must be presumed not to have intended to change the scheme of long-term lease stability created by the 1920 Congress. The 1920 Congress, appellants argue, knew that coal mining requires large capital expenditures that a mining company would not be willing to make if it could obtain fixed lease terms for only twenty years, and so it created the indeterminate lease. However, even assuming, without deciding, that the 1976 Congress did not intend to break promises of stability made by the 1920 Congress, we find no evidence that the 1920 Congress made any promise that would preclude a later Congress from regulating the royalty for coal leases.

The 1920 MLLA provided that "at the end of each twenty-year period succeeding the date of [a coal] 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." 41 Stat. at 439. The Act put no upper limit on the royalty rate the Secretary might set upon readjustment; hence, even without FCLAA the Secretary would have had the power (though not the obligation) to fix a rate of 12.5%. It is clear, therefore, that Congress never promised that coal lessees would not be subject to such a rate.

The appellants argue, however, that although under the 1920 Act the Secretary could choose such a rate, a subsequent Congress could not direct the Secretary's choice by law. Drawing on excerpts from the legislative history of the 1920 Act, the appellants claim that Congress decided permanently to lodge the authority to readjust royalty rates in the Secretary. The history cited by the appellants, however, shows no more than that Congress, in 1920, was faced with the ordinary choice between dictating certain rates by statute and leaving them to the discretion of an administrative official. Congress delegated authority, within certain limits, to the Secretary, but retained, as usual, the power to circumscribe the Secretary's authority further at a later date. This is made doubly clear by the express provision in the 1920 Act that readjustments shall be as the Secretary may determine "unless otherwise provided by law," which brings us back full circle to the initial inquiry of what, if anything, the current law does provide as to pre-1976 leases.

895 F.2d at 786-787 (footnotes omitted).

We agree with the analysis of the Western Fuels-Utah court that the MLLA did no more than represent the choice of Congress to leave the establishment of the royalty rates to administrative action rather than Congressional mandate. We reject Western's argument that the MLLA was a considered decision by Congress to limit its discretion in the future to change the Secretary's authority over the terms of the leases.

Western brings to our attention the case of Lau Ow Bew v. U.S., 144 U.S. 47, 12 S.Ct. 517, 36 L.Ed. 340 (1892), in support of this proposition. Apparently, this case was not cited to the other circuits by the parties in those cases, or if it was cited, it was not mentioned in the...