# Amicus Curiae Brief — National Mining Association Association v. Kempthorne (No. 08-63)

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0166%3A5

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2008

## Text

No. 08-63

IN THE

Supreme Court of the United States

—_—_ -

NATIONAL MINING ASSOCIATION,
Petitioner,
V.

DIRK KEMPTHORNE, SECRETARY
OF THE INTERIOR, et al.,
Respondents.

On PETITION FOR A WRIT OF CERTIORARI TO THE
UniTED States Court OF APPEALS
FOR THE District OF COLUMBIA

MOTION FOR LEAVE TO FILE AMICI CURIAE BRIEF AND
BRIEF ON BEHALF OF THE AMERICAN PETROLEUM INSTITUTE,
THE INDEPENDENT PETROLEUM ASSOCIATION OF AMERICA, AND
THE INDEPENDENT PETROLEUM ASSOCIATION OF MOUNTAIN
STATES AS AMICI CURIAE IN SUPPORT OF PETITIONER

Harry M. Nc PETERJ. SCHAUMBERG
Erik MILITO Counsel of Record
AMERICAN PETROLEUMINSTITUTE FRED R. WAGNER
1220 L Street, NW BEVERIDGE & Diamonp, PC.
Washington, DC 20005 1350 I Street, NW, Suite 700
(202) 682 8253 Washington, DC 20005
(202) 789 6000

Counsel for Amici Curiae

se
a

217613 cel

COUNSEL PRESS
(800) 274-3321 * (800) 359-6859

MOTION FOR LEAVE TO FILE AMICI CURIAE
BRIEF IN SUPPORT OF PETITIONER

The American Petroleum Institute (“API”) has
received the written consent of all parties to file this
amicus curiae brief. After API had already received
consent to file this brief, the Independent Petroleum
Association of America and the Independent Petroleum
Association of Mountain States (“Amicz”) agreed to join
with API in support of the arguments presented.
However, the additional Amici did not have the
opportunity under S. Ct. R. 37.2(a) to seek consent from
the parties. Amici therefore move pursuant to S. Ct.
R. 37.2(b) for leave to join API in filing this amicus
curiae brief in support of the petition for writ of
certiorari to the United States Court of Appeals for the
District of Columbia Circuit (“Court of Appeals”).

As more fully explained at pages 1-2 of the attached
brief under “Interests of Amici Curiae,” Amici are
trade associations that, like API, represent domestic
oil and gas producers. And like API’s members, Amici’s
members will suffer from the burden imposed by the
Office of Surface Mining’s definition of the phrase “Valid
Existing Rights,” set forth in 30 C.F.R. § 761.5 and
affirmed by the Court of Appeals, if that definition is
allowed to stand.

Accordingly, Amicz respectfully request that the
Court grant Amici leave to file the attached brief.

Respectfully submitted,

PETER J. SCHAUMBERG
Counsel of Record

FRED R. WAGNER

BEVERIDGE & Diamonp, PC.
1350 I Street, NW, Suite 700
Washington, DC 20005

(202) 789 6000

Harry M. Nc

Erk MILITO

AMERICAN PETROLEUM INSTITUTE
1220 L Street, NW
Washington, DC 20005

(202) 682 8253

Counsel for Amici Curiae

i

TABLE OF CONTENTS

INTERESTS OF AMICI CURIAE ...........

SUMMARY OF ARGUMENT ...............

sR ee ee eT ee ee

THE COURT’S REVIEW IS NECESSARY
BECAUSE THE DEPARTMENT OF THE
INTERIOR’S “VER” INTERPRETATION
COULD THREATEN THE CONTINUED
VIABILITY OF FEDERAL OIL AND GAS
EP V IEEE bch ona scaccccsseecsces

I.

VER HAS TRADITIONALLY
SERVED AS THE LINCHPIN
BALANCING PRE-EXISTING
EXPLORATION AND DEVELOP-
MENT RIGHTS AND FUTURE
CONSERVATION INTERESTS ON
PLS SEEMED: 550s avsnvccsveccs.

FEDERAL OIL AND GAS LEASE
EXPLORATION AND DEVELOP-
MENT IS ACOSTLY AND HIGHLY
REGULATED PROCESS .........

FEDERAL LANDS ARE
SUBJECT TO COMPETING
RESOURCE DEMANDS AND
MAY BE WITHDRAWN FROM
FURTHER DEVELOPMENT .....

Page

7

Contents

C. VERISTHE LEGAL “GLUE” THAT
PRESERVES THE RIGHTS OF
PUBLIC AND PRIVATE PROPERTY
HOLDERS BY BALANCING
COMPETING INTERESTS IN
PRT vaducedssnsuscess

II. “VER PLUS” UPSETS THE BALANCE
BETWEEN USE AND CONSER-
VATION OF RESOURCES ............

Ill.“VER PLUS” DISRUPTS EXISTING
PROPERTY RIGHTS AND MAY
RESULT IN REDUCED OIL AND
GAS PRODUCTION FROM FEDERAL
RAPED sSntassaNesetebdasevhesacice

“VER PLUS” IS UNREASONABLE AND NOT
ENTITLED TO DEFERENCE BECAUSE
IT CONFLICTS WITH THE SECRETARY
OF THE INTERIOR’S CONTEMPOR-
ANEOUS APPLICATION OF VER TO
FEDERAL MINERALS ..................

1. THE 1998 SOLICITOR’S OPINION
RECOGNIZES EXISTING PROPERTY
he SSG wh Nip nk 544606 RAs cen eee

Page

iii

Contents

Page

II. OSM’S INTERPRETATION IS
NOT ENTITLED TO CHEVRON
DEFERENCE BECAUSE OF DOI’S
ARBITRARY AND CAPRICIOUS,
CONFLICTING INTERPRETATIONS
GF PE cA dacccdhsctccopesse@anadinss 23

III. INCONSISTENT DOI OPINIONS
REGARDING VER UPSET THE
DELICATE BALANCE BETWEEN
DEVELOPMENT AND CONSER-
MEE bb es ciccvcéenccscdveseeevens 25

EE 6k 6 ccuvecccenisevacsupenweete 26

{
is
2
.
y
J
4
‘

iv

TABLE OF CITED AUTHORITIES

Cases:

Best v. Humboldt Placer Mining Co.,
er

California v. Norton,
311 F-3d 1162 (9th Cir. 2002) ...............

Chevron U.S.A., Inc. v. NRDC, Inc.,
occ ecacccnccces

Fina Oil & Chem. Co. v. Norton,
332 F.3d 672 (D.C. Cir. 2008) .............-.

INS v. Cardoza-Fonseca,
en es ce ebesese

Martin v. Occupational Safety
& Health Review Comm’n,
ED << cance bee vscacccsecese

Mobil Oil Exploration & Producing S.E., Inc.
v. United States, 530 U.S. 604 (2000) ........

NMA v. Kempthorne,
512 F.3d 702 (D.C. Cir. 2008) ...............

NRDC ». Berklund,
609 Fi2d 553 (D.C. Cir. 1980) ..............-

Page

Vv

Cited Authorities
Page

S. Utah Wilderness Alliance,

a ce cca en nees 16
S. Utah Wilderness Alliance v. U.S. DOI,

2007 U.S. Dist. LEXIS 55562

(D. Utah July 30, 2007) (Kimball, J.) ........ 18
S. Utah Wilderness Alliance v. Norton,

457 F. Supp. 2d 1253 (D. Utah 2006) ........ 18
Union Oil Co. of California v. Morton,

512 F-2d 743 (9th Cir. 1975) ............... 6,13
United States v. Winstar Corp.,

ES 13
Wilbur v. United States ex rel. Krushnik,

ee gua waee es 6
Constitution:
re ee Oe. cc odaneosecées ll
rE ese whesbeeaseen 13
Statutes:

Antiquities Act of 1906, Act of June 8, 1906, ch.
3060, 34 Stat. 225 (1906) (codified at 16 U.S.C.
ET cc+ccwdunethegheadtas Gund eee oe 12

vi

Cited Authorities
Page

Appropriations Act of Dec. 23, 1981, Pub. L. No.
97-100, 95 Stat. 1399 (Dec. 23, 1981) ....... 12, 17

Gulf of Mexico Energy Security Act of 2006,
Pub. L. No. 109-432, 120 Stat. 2922 (Dec. 20,
Dt Sli ccn pad keedeneweebneestow iwaens< 0 17

Mineral Leasing Act for Acquired Lands, Act
of Aug. 7, 1947, ch. 513, 61 Stat. 913 (1947)
(codified at 30 U.S.C. §§ 351 et seq.) ........ 8

| Mining Law of 1872, Act of May 10, 1872,
ch. 152, 17 Stat. 91 (codified at 30 U.S.C.
PE ov scckcabkseedndebavbesupenes 21, 22

Mineral Leasing Act of 1920, Pub. L. No. 146,
41 Stat. 437 (1920) (codified at 30 U.S.C.
ETE ae eae oe 22

National Marine Sanctuaries Act, Pub. L. No.
101-605, 104 Stat. 3089 (1990) (codified at
16 U.S.C. §§ 1481 et seg.) «0... cece cece eee 12

Outer Continental Shelf Lands Act, Pub. L. No.
212, 67 Stat. 462 (1953) (codified at 48 U.S.C.
PE oe cvivcdshaenbnnbeddeescet 8, 15

Surface Mining Control and Reclamation Act
of 1977, Pub. L. No. 95-87, 91 Stat. 445 (1977)
(codified at 30 U.S.C. §§ 1201 et seg.) ....... 5

vii

Cited Authorities
Page
Wilderness Act of 1964, Pub. L. No. 88-577, 78
Stat. 890 (1964) (codified at 16 U.S.C. §§ 1133
EE Reeds ASS 08s wh cdccveccccecceetepes 13, 21
16 U.S.C. § 1133(d)(3) «0... ee ee eee eee ee eee 21, 22
ET vc cevacvccsbec sane ctdbney bas 13
EE dd eccn béunvesdabossoenae see’ 22
i cc nsvensedkeebns gaveceets eased 15
ED <nvesestesevecvpobescesiccses 15
EE vic orcccccvdscoesesvoeeees 8
ED svc accasccosvcsesceensvess 12
ED sc ceconccteictveccccessoen 8, 11
ED beac chsesss avcetevevsess . 13
Regulations:
EE Gisvcboedeevevesvescerscesss 15
30 C.FR. §§ 250.168 - 250.177 ................ 16

BD (Rees PEED osc cccccccvescceeevceesees 10

vili

Cited Authorities

Page
EE io, o open cesesadeesanese 10
EE RE RE EER ae Nana mesa 9
Ses IS 6 ond s viebicnceccccecséivenne 16
Proclamation No. 6920, 61 Fed. Reg. 50,223
ED: pen. ink snes deve dens cksonner 12, 13
Proclamation No. 8031, 71 Fed. Reg. 36,443
i i ond Cah whee eenekeent 12
Valid Existing Rights, Final Rule, 64 Fed. Reg.
I ED og vccceccncceseecoes 25
Other Authorities:
American Petroleum Inst., OCS Moratoria Fact
Sheet, http://www.energytomorrow.org/energy/
OCS_Moratoria_Fact_Sheet.aspx .......... 9

Energy Info. Admin., Oil and Natural Gas
Market Supply and Renewable Portfolio
Standard Impacts of Selected Provisions of
H.R. 3221 (Dec. 2007), http://www.eia.doe.gov/
oiaf/servicerpt/bmy/index.html ............. 9

ix

Cited Authorities

DOI Departmental] Manual, Part 209, Chapter
3.2A(11) (209 DM 3.2A(11)), http://elips.doi.
gov/ app_home/index.cfm?fuseaction=home

Jan G. Laitos, The Nature & Consequence of
“Valid Existing Rights” Status in Public

Page

Lands Law, 5 J. Min. L. & Pot’y 399 (1989) ... 9, 15, 23

Larry Rohter, Obama, in New Stand, Proposes
Use of Oil Reserve, N.Y. Times, Aug. 5, 2008
Mn be ccede cc tuacedawheienebiete.s

Mark Udall, http://www.markudall.com/page/s/
Fis eek Adin k ued bedbnnec

Minerals Mgmt. Serv. (“MMS”), 2001-Forward
MRM Statistical Information, http://www.
mrm.mms.gov/MRM WebStats/Home.aspx

MMS, OCS Report, MMS 2008-013, Deepwater
Gulf of Mexico 2008: America’s Offshore
Energy Future 76-77 (2008), http://www.gomr.
mms.gov/PDF's/2008/2008-013.pdf ..........

MMS Webpage, http://www.mms.gov/offshore/
gomesa/gomesa.htm ...........2.e eee eeeee

q
,
,

J

x

Cited Authorities

Patenting of Mining Claims and Mill Sites in
Wilderness Areas, M-36994 (May 22, 1998) ..

Press Release, More than 17,099 Protest BLM
Decision to Lease the Roan Plateau,
available at http://www.saveroanplateau.org

Steven Lee Myers & Carl Hulse, Bush Lifts
Drilling Moratorium, Prodding Congress,
N.Y. Times, July 14, 2008, available at http://
www.nytimes.com/2008/07/1 4/washington/
14drillend.html?_r=2&sq=Drilling%20
Moratorium &st=cse&adxnnl=1&oref=
slogin&éscp=1€&adxnnlx=1218560935-
m58a960jOgjprPxNZT3aAQ ...............

Page

1

The American Petroleum Institute, the
Independent Petroleum Association of America, and the
Independent Petroleum Association of Mountain States
respectfully submit this brief as amici curiae in support
of petitioner.’

INTERESTS OF AMICI CURIAE

Amici concur in the arguments advanced by the
National Mining Association (“NMA”) in its Petition for
a Writ of Certiorari filed with the Court on July 14, 2008
(“NMA Petition”), and proffer the following, additional
reasons why it is important that the Court grant the
NMA Petition.

The American Petroleum Institute is a nationwide,
non-profit, trade association headquartered in
Washington, D.C. that represents over 400 members
engaged in all aspects of the petroleum and natural gas
industry, including exploration, production,
transportation, refining and marketing.

The Independent Petroleum Association of America
represents the thousands of independent oil and natural

' No counsel for a party authored this brief in whole or in
part, and no such counsel or party made a monetary contribution
intended to fund the preparation or submission of this brief.
No person other than the amici curiae, or its members, or
counsel, made a monetary contribution to its preparation or
submission. The parties have consented to the filing of this brief
by the American Petroleum Institute, and have been given at
least 10 days notice of such filing. Those consents are being
lodged herewith. Unfortunately there was not enough time to
obtain the consents with respect to the other two amici.

2

gas producers and service companies across the
United States. IPAA is a national trade association
headquartered in Washington, D.C. that serves as an
informed voice for the exploration and production
segment of the industry.

The Independent Petroleum Association of
Mountain States, founded in 1974, is a non-profit trade
association representing more than 400 independent oil
and natural gas producers, service and supply
companies, banking and financial institutions and
industry consultants committed to environmentally
responsible oil and natural gas development in the
Intermountain West.

Amici represent all segments of the domestic oil
and gas industry, from the largest integrated companies
to the smallest independent oil and gas producers.
Amici’s members are unified in their concern regarding
the decision of the Court of Appeals finding no error in
the interpretation of the phrase “valid existing rights”
(“VER”) adopted by the United States Department of
the Interior’s (“DOI”) Office of Surface Mining (“OSM”).
That interpretation is dramatically inconsistent with
long-standing principles governing the property rights
of lessees on public lands.

SUMMARY OF ARGUMENT

The D.C. Circuit wrongly allowed DOI’s novel and
insupportable interpretation of VER, which engrafts an
“all permits” requirement onto the well-established
application of VER in withdrawal situations, to stand.
If left uncorrected, that ruling threatens pre-existing

3

\
property rights and upsets the delicate balance between

competing interests in resources on federal lands.
Moreover, it provides precedent for DOI to apply a
similarly insupportable interpretation to other
withdrawals of federally-managed lands, and could
therefore seriously disrupt what to this point had been
the settled right and expectation to develop a federal
oil and gas lease once it is issued by DOJ. DOI’s
interpretation would thus threaten the value of such
leases and may deter investment by the domestic oil and
gas industry in production onshore and on the Outer
Continental Shelf (“OCS”), an unacceptable outcome
given today’s prevalent energy challenges.

3

A. The D.C. Circuit’s ruling upsets the balance
between the use and conservation of resources on
federal lands achieved through the well-accepted
application of VER prior to DOI’s interpretation.
Congress has declared the development of federally-
managed onshore and offshore oil and gas resources to
be a national priority. Property rights to develop oil and
gas resources accrue to a leaseholder upon issuance of
the lease; yet, due to both regulatory and economic
factors, it often takes substantial time and financial
resources to commence production. Secure in these
property rights, amici’s members, who hold large
numbers of leases, have invested billions of dollars over
many years to secure and develop these leases.

B. Other demands on federal lands must be
balanced against resource development. These
competing uses include recreation, wilderness, and

4

conservation. Acting pursuant to various authorities,
Congress and the Executive accordingly may designate
and withdraw areas from leasing or development.

C. VER serves as the essential tool preserving the
balance between these competing demands. By
regularly including VER provisions in over 100 federal
laws, Congress recognizes that, despite its plenary
authority over the use and disposition of federal lands
and interests therein, preexisting property rights in
federal oil and gas leases in a withdrawn area must be
respected. VER provisions instill confidence in existing
and prospective domestic oil and gas producers that
future withdrawals will not upset their considerable
investment or require expensive takings litigation.

II.

Given the importance of VER, future withdrawals
coupled with compromised VER provisions would strip
the rights of federal lessees and, consequently, may deter
important future investment in domestic oil and gas
resources on federal lands. DOI’s VER interpretation,
which superimposes a requirement that a producer not
only holds a valid lease but also has obtained al]
necessary permits prior to withdrawal of the area from
further mineral leasing and development, unfortunately
achieves precisely this result. An oil and gas lessee may
spend billions of dollars on bonuses, rentals and
exploration costs before it is even in a position to apply
for its development permits. And, given the need for
exploration and planning, the lessee will not be able to
submit that permit application until many years after
the lease is issued.

5

Under DOI’s VER interpretation, during the multi-
year window between leasing and receipt of permits,
every federal oil and gas lessee would face the threat of
unilateral cancellation by the government of leases in
which it has invested potentially billions of dollars. DOI’s
VER interpretation ignores the considerable time
required to obtain permits after a lease is issued and
jeopardizes a lessee’s property rights until production
is feasible and imminent. Though DOI’s VER
interpretation at this point applies only to coal mining
under the Surface Mining Control and Reclamation Act
(““SMCRA”), 30 U.S.C. § 1272(e), DOI could seek to
extend similar VER interpretations in the future to
analogous federal land contexts.

IIT.

Because DOI’s VER interpretation threatens to take
lessees’ development rights, it also may diminish existing
and future lessees’ incentive to invest in domestic
resources on federal lands and ultimately may result in
decreased domestic production. Such deterrence is
particularly troubling given the already restricted
opportunities for domestic production and the national
debate surrounding the opening of new areas to leasing.
In a time of pervasive energy challenges nationwide,
DOI’s VER interpretation would have the undesirable
effect of making federally-managed resources even less
attractive.

6
IV.

DOI’s VER interpretation deserves no deference
because it conflicts with contemporaneous
interpretations of VER at the highest agency level.
Inde2d, concurrent with OSM’s rulemaking setting out
its “all permits” requirement, the DOI Solicitor published
a formal opinion, concurred in by the Secretary and
binding on OSM, concluding that property rights
embodied in a valid mining claim could aione establish
VER without any permit requirement. In such
circumstances, DOI’s contrary VER interpretation is
unreasonable and the D.C. Circuit was wrong to defer.

ARGUMENT

THE COURT’S REVIEW IS NECESSARY BECAUSE
THE DEPARTMENT OF THE INTERIOR’S “VER”
INTERPRETATION COULD THREATEN THE
CONTINUED VIABILITY OF FEDERAL OIL AND
GAS DEVELOPMENT

Prior to DOI’s 1999 interpretation of VER, it was
generally recognized that the holder of a property right
to develop minerals on federally-administered land,
whether through a federal oil and gas lease,’ a federal
coal lease,’ or a valid mining claim,‘ was protected from

2 Union Oil Co. of California v. Morton, 512 F.2d 743, 750-
51 (9th Cir. 1975).

3’ NRDC v. Berklund, 609 F.2d 553, 559 (D.C. Cir. 1980).
4 Wilbur v. United States ex rel. Krushnik, 280 U.S. 306,

316-17 (1930); Best v. Humboldt Placer Mining Co., 371 U.S.
334, 335-37 (1963).

7

the effects of future regulatory actions withdrawing that
area from mineral development. The Court of Appeals,
however, affirmed DOI’s interpretation of VER as
requiring not only the existence of a property interest
but also that the holder acquire or reasonably attempt
to acquire requisite permits necessary for production.
The oil and gas industry is concerned that this “VER
Plus” definition, if left unchecked, is clear precedent that
may be applied to existing and future VER provisions
that affect federal oil and gas leases. This real possibility
seriously threatens the value of federal oil and gas leases
and could deter the domestic oil and gas industry from
investing in oil and gas production onshore and on the
OCS.

Adverse impacts to this Nation’s oil and zgas
production capability could not come at a worse time.
Our Nation faces historically-high energy prices.
Restrictions on leasing that defy existing property rights
and put significant volumes of our oil and gas resources
off-limits challenge our economic stability and threaten
our national security.

8

I. VER HAS TRADITIONALLY SERVED AS THE
LINCHPIN BALANCING PRE-EXISTING
EXPLORATION AND DEVELOPMENT RIGHTS
AND FUTURE CONSERVATION INTERESTS
ON PUBLIC LANDS

A. FEDERAL OIL AND GAS LEASE
EXPLORATION AND DEVELOPMENTISA
COSTLY AND HIGHLY REGULATED
PROCESS

Development of federally-managed oil and gas
resources is an important national policy. 43 U.S.C.
§ 1701(a)(12) (“The Congress declares that it is the policy
of the United States that. . . the public lands be
managed in a manner which recognizes the Nation’s
need for domestic sources of minerals. . .”); 48 U.S.C.
§ 1332(3) (“[T]he outer Continental Shelf is a vital
national resource reserve held by the Federal
Government for the public, which should be made
available for expeditious and orderly development .. .”).
Amici’s members hold property rights in large numbers
of oil and gas leases on federal lands onshore and on
the OCS issued under various mineral leasing laws
administered by DOI.’ As of 2007, there were well in
excess of 28,000 producing federal oil and gas leases.°®

® The principal mineral leasing laws for oi] and gas include
the Outer Continental Shelf Lands Act, 43 U.S.C. §§ 1331 et seq.
(“OCSLA”); the Mineral Leasing Act (“MLA”), 30 U.S.C. §§ 181
et seq.; and the Mineral Leasing Act for Acquired Lands, 30
U.S.C. §§ 351 et seg.

®° See Minerals Mgmt. Serv. (“MMS”), 2001-Forward MRM
Statistical Information, http://www.mrm.mms.gov/MRM Web
Stats/Home.aspx (last visited Aug. 11, 2008).

9

Oil and gas production from onshore and offshore federal
lands is particularly vital to our Nation’s economic well-
being, accounting for 35% of domestic oil production and
30% of domestic natural gas production as of 2006.’

Federal oil and gas leases are issued with a primary
term generally ranging from five to ten years. See, e.g., 30
C.ER. § 256.37 (stating that initial term of oil and gas leases
on the OCS shall be for five years and cannot «ceed ten
years). Thereafter, the leaseholder retains lease rights as
long as there is production from the lease in paying
quantities. Jd. Property rights are conferred upon lease
issuance, see Jan G. Laitos, The Nature & Consequence of
“Valid Existing Rights” Status in Public Land Law, 5 J.
Min. L. & Pot’y 399, 416 (1989) [hereinafter Laitos, The
Nature & Consequence of “Valid Existing Rights”), but
it generally takes years of diligent effort and significant
investment to obtain the requisite permits and approvals
to bring a lease into production, particularly on the OCS.
See, e.g., Minerals Management Service (“MMS”),
OCS Report, MMS 2008-013, Deepwater Gulf of Mexico
2008: America’s Offshore Energy Future 76-77 (2008)
(“MMS Report”).* During those years, the leaseholder

’ Energy Info. Admin., Oil and Natural Gas Market
Supply and Renewable Portfolio Standard Impacts of Selected
Provisions of H.R. 3221 (Dec. 2007), http:/Awww.eia.doe.gov/oiaf/
servicerpt/bmy/index.html (last visited Aug. 11, 2008).

8 Available at http://www.gomr.mms.gov/PDF's/2008/2008-
013.pdf (last visited Aug. 11, 2008); see also American Petroleum
Inst., OCS Moratoria Fact Sheet, http://www.energy
tomorrow.org/energy/OCS_ Moratoria_ Fact_Sheet.aspx (last
visited Aug. 11, 2008).

10

may spend billions of dollars for exploration and
development of its lease on top of the millions of dollars
that may have been paid in bonus bids to secure the
lease in the first place. Jd. Costs to develop in the
deepwater OCS, likely the best prospect for future
development, are particularly staggering. MMS Report
at 14. All of this investment is made in good faith reliance
on those property rights received under the lease
contract.

Compounding the enormity of the costs sunk into
development is the fact that it will take years, if ever,
for a lessee to see a return on its investment. This is
especially true offshore, where production may not occur
for as many as ten years depending on the complexity
of the engineering challenges, including water and
drilling depths and the geological characteristics of the
reservoir, that lessees must overcome in developing
their leases. Jd. at 14, 76-77. In addition, lessees seeking
to develop their offshore leases face a burdensome,
multi-step permitting process. /d. at 39. For example,
before drilling can even begin, MMS must first approve
a highly-technical Exploration Plan that involves an
extensive review of geological, geophysical and
engineering data, all of which must be developed by the
lessee. 30 C.E-R. § 250.201. Further, before the lessee
may begin production, MMS must approve a
Development and Production Plan or Development
Operations Coordination Document, another highly-
technical document. Jd. Of course, an oil and gas lessee
must obtain a variety of other permits to satisfy its
obligations under other environmental statutes before
production may begin. See 30 C.F.R. § 250.281.

11

B. FEDERAL LANDS ARE SUBJECT TO
COMPETING RESOURCE DEMANDS AND
MAY BE WITHDRAWN FROM FURTHER
DEVELOPMENT

The need to develop our Nation’s federally-managed
mineral resources is always balanced against competing
resource values. See, e.g., 43 U.S.C. § 1701(a)(8)
(declaring that it is the policy of Congress, inter alia,
that “the public lands be managed in a manner that will
protect the quality of scientific, scenic, historical,
ecological, environmental, air and atmospheric, water
resource, and archeological values”). In addition to their
substantial mineral resource values, our Nation’s federal
lands often are visually unique and have value for
purposes including recreation, wilderness, archeological
resources, and other uses. The significance of these
other resource values regularly subjects these lands to
consideration by Congress, the President, or the
Secretary of the Interior for mixed uses, including
withdrawal from further mineral development. Similarly,
our coastal states have resources important to uses
such as tourism and recreational opportunities.
In consideration of these coastal resources and other
concerns, Congress and the President likewise may
withdraw areas of the OCS from leasing and
development.

Various authorities are available to Congress and
the Executive to achieve that purpose. Through the
Property Clause, U.S. Const. art. IV, § 3, cl. 2, Congress
has plenary authority over disposition of federal lands
and resources. Well over 100 statutes have authorized
withdrawal of lands from application of the mineral
leasing laws and other mineral disposition statutes.

12

See Appendix E to NMA Petition (“NMA Appendix E”).
Congress uses this authority to designate national parks,
wildlife refuges, recreation areas, and wilderness areas
(to name but a few), precluding new leasing and
development of oil and gas in these designated areas.
For the past 27 years, Congress also has imposed an
annual moratorium on oil and gas leasing for most areas
of the OCS except the Central and Western portions of
the Gulf of Mexico, small portions of the Eastern Gulf of
Mexico, and certain areas offshore of Alaska. See, e.g.,
Appropriations Act of Dec. 23, 1981, Pub. L. No. 97-100,
95 Stat. 1399 (Dec. 23, 1981) (the first appropriations
bill to contain the moratorium on leasing).

Congress also has delegated certain withdrawal
authority to the Executive Branch. Recently, Presidents
Bush and Clinton have utilized the authority granted
by the Antiquities Act, 16 U.S.C. §§ 431 et seq., to
withdraw lands in Hawaii’ and Utah," respectively.
Similarly, OCSLA authorizes the President to withdraw
areas of the OCS from consideration for leasing. 43
U.S.C. § 1341(a). The Secretary of the Interior also has
authority to withdraw lands from disposition. Under the
National Marine Sanctuaries Act, 16 U.S.C. §§ 1431 et
seq., the Secretary may designate marine sanctuaries
as areas off-limits to mineral development. The
Secretary also may temporarily withdraw lands from

®° Establishment of the Northwestern Hawaiian Islands
Marine National Monument, Proclamation No. 8031, 71 Fed.
Reg. 36,443 (June 26, 2006).

1 Establishment of the Grand Staircase-Escalante
National Monument, Proclamation No. 6920, 61 Fed. Reg. 50,223
(Sept. 24, 1996).

13

further mineral development while Congress considers
a permanent withdrawal. See, e.g., 16 U.S.C. § 3213;
43 U.S.C. § 1714(c).

C. VER IS THE LEGAL “GLUE” THAT
PRESERVES THE RIGHTS OF PUBLIC
AND PRIVATE PROPERTY HOLDERS BY
BALANCING COMPETING INTERESTS IN
PUBLIC LANDS

Obviously, if Congress or the Executive directly
extinguished pre-existing federal oil and gas lease rights
in an area for which it is implementing a withdrawal,
the existing property-right holders would have an action
against the government for breach of contract and
unlawful taking in violation of the Fifth Amendment to
the United States Constitution. See Mobil Oil
Exploration & Producing S.E., Inc. v. United States,
530 U.S. 604, 607 (2000); United States v. Winstar Corp.,
518 U.S. 839, 843 (1996); Union Oil, 512 F:2d at 750-51.
To avoid that legal consequence, Congress or the
President typically includes a provision that protects
VER. See, e.g., Wilderness Act of 1964, 16 U.S.C.
§ 1133(d)(3); Establishment of the Grand Staircase-
Escalante National Monument, Proclamation No. 6920,
61 Fed. Reg. 50,223, 50,225 (Sept. 24, 1996) (“The
establishment of this monument is subject to valid
existing rights.”); see also NMA Appendix E. Such
provisions embody the well-understood concept that
persons who hold existing mineral leases and property
rights in newly protected areas have the right to
continue to enjoy those property rights (although
development may become more difficult as a
consequence of the withdrawal). See NMA Petition at
8-9 n.16.

14

VER preserves a delicate and important balance in
federal property law that has developed over many
years. The various statutory, VER provisions reflect
Congress’ recognition that, while it has plenary authority
over the use and disposition of federal lands and
interests in land, and therefore may remove or withdraw
those lands from use or disposition for mineral
development or any other purpose, there likewise is a
requirement to respect pre-existing private interests
in those federal lands and resources at the time of
withdrawal.

If Congress did not regularly include VER
provisions in federal statutes that withdraw lands from
previously acceptable mineral disposition and other
uses, few, if any, would invest in developing federal
resources because of the very real prospect that, at any
time, Congress may render their efforts effectively
worthless. At best, the affected rights holders would face
years of litigation to recover their prior investment from
the government through an action for a taking or breach
of contract. VER is the “glue” that holds this delicate
balance together — Congress or the Executive may
withdraw lands and resources from previously acceptable
uses, but those who made investments in those
resources prior to withdrawal are entitled to retain the
benefit of their efforts.

15

Il. “VER PLUS” UPSETS THE BALANCE
BETWEEN USE AND CONSERVATION OF
RESOURCES

DOI’s VER Plus interpretation of SMCRA departs
dramatically from the well-recognized application of
VER in withdrawal situations. VER provisions generally
require only the demonstration of a valid property right
to produce minerals that pre-dates the withdrawal.
Laitos, The Nature & Consequence of “Valid Existing
Rights” at 425. DOI’s VER Plus, however, requires not
only the demonstration of a valid property right but also
demonstration of a lessee’s satisfaction of additional
conditions (7.e., all permits required to begin production
have been obtained or applied for). See 30 C.F-R. § 761.5.

There is no reasoned basis to distinguish the
property interest granted under a federal coal lease
subject to DOI’s VER Plus interpretation from the
property interest granted under a federal oil and gas
lease. Federal coal leases are issued under the same
leasing statute as onshore oil and gas leases. Compare
30 U.S.C. § 201 (coal) with 30 U.S.C. § 226 (oil and gas
onshore). Therefore, under the Court of Appeals’
decision, nothing would prevent DOI from applying VER
Plus.in the onshore oil and gas context should the area
where the lease is located be withdrawn from further
development by a post-lease statute or Executive action.
Further, because the leasing regime for offshore leases
under OCSLA, 43 U.S.C. § 1337, is the same as under
the MLA, see Fina Oil & Chem. Co. v. Norton, 332 F.3d
672, 673 (D.C. Cir. 2003), the same concern applies for
offshore leases.

16

If VER Plus were applied to the federal oil and gas
leasing regime, the delicate balance between use and
conservation of resources would falter. A federal oi] and
gas lease grants the leaseholder the right to develop
mineral resources thereunder without unreasonable
restriction. See, e.g.,S. Utah Wilderness Alliance, 159
IBLA 220, 240-41 (2003). DOI’s VER Plus standard
alters that important legal principle by limiting that
development right only to situations where the lessee
effectively is ready to commence production because it
has obtained all permits or made a good faith effort to
do so. Until such time, the functional effect of the DOI
regulation is that the lessee’s rights under its lease are
subject to unilateral termination by the government.
Because it may take years from the time a lease is issued
to obtain the requisite regulatory approvals and permits
to begin production from a federal oil and gas lease,
particularly on the OCS, the lessee risks losing its
property rights and substantial investment any time
before it begins production.

This is particularly problematic where either the
MMS or the Bureau of Land Management (“BLM”) has
directed a suspension of a federal lease, see 30 C.F-R.
§§ 250.168 - 250.177 (MMS); 43 C.ER. § 3103.4-4 (BLM),
during which time the lessee is prevented from
conducting those activities on the lease necessary to
obtain requisite permits. Because these suspensions
frequently remain in effect for years, see California v.
Norton, 311 F.3d 1162, 1173 n.6 (9th Cir. 2002), during
that entire time the lessee would be at risk of losing its
lease if Congress subsequently withdrew the area from
mineral disposition. VER Plus exacerbates that risk.

17

Ill. “VER PLUS” DISRUPTS’ EXISTING
PROPERTY RIGHTS AND MAY RESULT IN
REDUCED OIL AND GAS PRODUCTION
FROM FEDERAL LEASES

Investing in domestic exploration and development
has historically been attractive to the oil and gas
industry because of the certainty of the property rights
granted under federal mineral leases. If that certainty
no longer exists, domestic oil and gas companies will
likely be less willing to pay tens of millions of dollars in
bonus bids for oil and gas leases if the Federal
Government later may declare the area off-limits and
leave the lessee with a non-producible lease if it has not
yet acquired all the requisite permits to begin
production. This new threat — that a lease does not
provide a secure right to produce — will be most acutely
felt in those areas with a significant risk of withdrawal.

For example, millions of acres of the OCS currently
are unavailable for leasing and development pursuant
to a moratorium that has been renewed annually for the
past 27 years. See, e.g., Pub. L. No. 97-100 (Dec. 23,
1981). In 2006, some of the areas of the Eastern Gulf of
Mexico previously subject to the moratorium were made
available for leasing as a consequence of the Gulf of
Mexico Energy Security Act of 2006, Pub. L. No. 109-
432, 120 Stat. 2922 (Dec. 20, 2006) (“GOMESA”). Lease
sales were held pursuant to GOMESA in October 2007
and March 2008, resulting in bonus bids in the tens of
millions of dollars and another lease sale is anticipated
in 2009.'! Moreover, today, as a consequence of

'! See http://www.mms.gov/offshore/gomesa/gomesa.htm
(last visited Aug. 11, 2008).

18

historically-high oil prices, Congress is embroiled in a
heated debate over opening additional areas of the
Eastern Gulf of Mexico and Atlantic OCS to leasing and
development.” Lifting the moratorium even has become
an important issue in the presidential campaign, as both
major-party candidates have expressed support for
increased offshore development.'*

Opening new areas to leasing is equally controversial
onshore. Most recent federal onshore oil and gas lease
sales held by the BLM have been challenged. See, e.g.,
S. Utah Wilderness Alliance v. U.S. DOI, 2007 U.S.
Dist. LEXIS 55562 at *4-5 (D. Utah July 30, 2007)
(Kimball, J.). Issues include concerns about impacts of
development on wildlife, air quality, and archeological
resources as well as on areas that are considered by
some to be of wilderness quality. See, e.g., S. Utah
Wilderness Alliance v. Norton, 457 F. Supp. 2d 1253
(D. Utah 2006). The debate is more animated when BLM
seeks to offer new areas that were not extensively leased,
like Colorado’s Roan Plateau.“ For the most part, BLM

——

'2 See, e.g., Steven Lee Myers & Cari Hulse, Bush Lifts
Drilling Moratorium, Prodding Congress, N.Y. Times, July 14,
2008, available at http://www.nytimes.com/2008/07/14/
washington/14drillend.html? r= 2&sq=Drilling%20 Morator
ium&st=cse&adxnnl=1€oref=slogin&scp=1&adxnnlx=
1218560935-m58a960jOgjprPxNZT3aAQ (last visited Aug. 11,
2008).

13 See, e.g., Larry Rohter, Obama, in New Stand, Proposes
Use of Oil Reserve, N.Y. Times, Aug. 5, 2008 at Al4.

See, e.g., Press Release, More than 17,000 Protest BLM
Decision to Lease the Roan Plateau, available at http://
www.saveroanplateau.org (last visited Aug. 11, 2008).

19

has proceeded to issue leases in these controversial
areas, but some in Congress have sought to place certain
of these areas off limits to development.’®

Opening federally-managed lands onshore and
offshore to new or expanded oil and gas development is
critical to the vitality of the domestic oil and gas industry,
but the process is continually scrutinized. While
Congress and BLM have recently pursued leasing
certain new areas offshore and onshore, Congress or
the Executive could withdraw controversial areas from
further leasing and development, subject to VER. If this
were to occur and VER Plus were to apply to existing
oil and gas lessees who have expended billions of dollars
on bonuses, rentals, and exploration costs, they will not
be able to proceed with developing their leases if they
have not, in addition to possessing valid property rights
in the form of oil and gas leases, satisfied the additional
conditions imported by DOI, which in this case would
be obtaining all their permits.

If the ruling below stands, future BLM- and MMS-
sponsored lease sales could be significantly impacted.
If potential lessees should participate, they will risk less
money in bonus bids. The Federal Government thus
could receive fewer bids for leases and less revenue from
bonus bids because of legal uncertainties regarding the
sanctity of property rights conveyed by the lease.
Companies could divert more revenue to exploration and
development outside the United States, ultimately

6 See, e.g., http:/;Awww.markudall.com/page/s/SaveTheRoan
(last visited Aug. 11, 2008).

20

decreasing domestic reserves and increasing
dependence on foreign and less secure sources of supply.
In short, the risk that DOI could impose its VER Plus
interpretation on federal oil and gas leases will
undeniably make federally-managed lands less attractive
for oil and gas development, resulting in a possible
reduction in federal revenues and in domestic
production from federal lands.

“VER PLUS” IS UNREASONABLE AND NOT
ENTITLED TO DEFERENCE BECAUSE IT
CONFLICTS WITH THE SECRETARY OF
THE INTERIOR’S CONTEMPORANEOUS
APPLICATION OF VER TO FEDERAL MINERALS

Coal, hard-rock minerals (e.g., gold, silver, and
copper), and oil and gas are the three most significant
mineral regimes on federal lands. Between 1997 and
1999, OSM went through a rulemaking and adopted
VER Plus for coal. In the midst of the rulemaking
process, the Solicitor of the Department of the Interior
(“Solicitor”), who is the chief legal officer for all DOI
bureaus (including OSM), issued a formal! opinion
addressing VER in the hard-rock mining context. He
reached a conclusion consistent with the prevailing
definition of VER rather than VER Plus. This conflicting
and binding Opinion demonstrates that OSM’s
interpretation is arbitrary and capricious and not
entitled to deference as a legal matter, justifying this
Court’s grant of certiorarz to review the decision below.
Moreover, inconsistency in the administrative
interpretation of the same legal concept in two regimes
creates great uncertainty as to which interpretation

21

DOI will apply to the third mineral regime, oil and gas,
calling into question the sanctity of existing property
rights.

I. THE 1998 SOLICITOR’S OPINION RECOGNIZES
EXISTING PROPERTY RIGHTS

In a formal published opinion, “Patenting of Mining
Claims and Mill Sites in Wilderness Areas,” M-36994
(May 22, 1998) (“Solicitor’s Opinion”), concurred in by
the Secretary of the Interior, the Solicitor addressed
the rights of certain holders of mining claims located
pursuant to the Mining Law of 1872, 30 U.S.C. $§ 21
et seq., in areas within the National Wilderness
Preservation System'* withdrawn from further mineral
entry and leasing under the Wilderness Act, 16 U.S.C.
§ 1133(d)(3). The Wilderness Act was enacted in 1964,
but allowed for continued location of mining claims, and
issuance of federal mineral leases, until December 31,
1983. It then provides:

Subject to valid rights then existing, effective
January 1, 1984, the minerals in lands
designated in this Act as wilderness areas are
withdrawn from all forms of appropriation
under the mining laws and from disposition
under all laws pertaining to mineral leasing
and all amendments thereto.

Id. Thus, for covered areas, the Wilderness Act allowed
the location of mining claims under the Mining Law of

‘6 Areas within the National Wilderness Preservation
System are also expressly included in SMCRA § 522(e).

22

1872, and issuance of federal leases for oil and gas, coal
and other minerals pursuant to the Mineral Leasing Act,
30 U.S.C. §§ 181 et seg., until December 31, 1983.
Thereafter, subject to “valid rights then existing,”
further mineral dispositions were prohibited.

The Solicitor’s Opinion addressed whether, under
a different provision of 16 U.S.C. § 1133(d)(3)" that
specifically addressed valid existing rights to a patent,!*®

claims where the claimant properly located a
mining claim and made a discovery of a
valuable mineral deposit before the land in
question was designated as wilderness, but for
which the claimant had not established a right
to a patent before the land was designated as
wilderness . . . should be patented without a
reservation of the surface estate.

Solicitor’s Opinion at 4-5. In analyzing this issue, the
Solicitor reviewed all the VER provisions within
§ 1133(d)(3), including the provision quoted above. The
Solicitor opined: “[ijn short, nothing in the language of
section 4(d)(3) .. . affects a claimant’s ability to continue

“ “(Ajnd hereafter, subject to valid existing rights, all
patents issued under the mining laws of the United States
affecting national forest lands designated by this Act as
wilderness areas [including BLM lands, see Solicitor’s Opinion
at 2 n.4} shall convey title to the mineral deposits within the
claim...”

'® The Mining Law, 30 U.S.C. § 29, provides the procedure
by which a mining claimant may apply for a patent, i.e., fee title
to a validly located claim.

23

to develop the valuable minerals on a preexisting
unpatented mining claim, so long as a valid claim had
been established as of the time the land was withdrawn
from further appropriation under the mining laws.”
Id. at 8.

This conclusion reached by DOI’s chief legal officer
and the Secretary in 1998, in the midst of the rulemaking
adopting the VER Plus interpretation, diverges 180
degrees from OSM’s unique permits-plus interpretation.
While OSM interprets VER as requiring more than just
the legal entitlement to mine, the Solicitor and the
Secretary concluded that the existence of property
rights embodied in a valid mining claim alone was
adequate to establish VER, thereby protecting those
rights from the consequences of a later withdrawal of
the affected lands. OSM’s departure from the latter,
accepted VER interpretation would be further
pronounced if applied to withdrawals from oil and
gas development given that vested property rights
even more clearly predominate in the leasing context.
‘See Laitos, The Nature & Consequence of “Valid
Existing Rights” at 416-17.

II. OSM’S INTERPRETATION IS NOT ENTITLED
‘TO CHEVRON DEFERENCE BECAUSE
OF DOI’S ARBITRARY AND CAPRICIOUS,
CONFLICTING INTERPRETATIONS OF VER

While an agency’s construction of the laws it is
charged to implement is entitled to substantial
deference, Martin v. Occupational Safety & Health
Review Comm’n, 499 U.S. 144, 150 (1991), the agency’s
interpretation must not be arbitrary or capricious,

24

Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837, 844
(1984). Here, the D.C. Circuit did not find OSM’s
interpretation to be unlawful, even though it had
changed its interpretation over the years since
SMCRA’s passage, with OSM ultimately concluding that
VER must be limited by the all permits-plus standard.
512 F.3d 702, 712 (D.C. Cir. 2008).

DOI policy states that the Solicitor’s formal legal
opinions, or “M-Opinions,” are “binding on all other
Departmental offices and officials and . . . may be
overruled or modified only by the Solicitor, the Deputy
Secretary, or the Secretary.” DOI Departmental Manual,
Part 209, Chapter 3.2A(11) (209 DM 3.2A(11)).'® The
Acting Assistant Secretary of the Department of the
Interior, who signed the Final Rule establishing VER
Plus, does not qualify as an agency official entitled to
depart from or otherwise alter the Solicitor’s Opinion.
OSM’s interpretation is therefore entitled to no
deference. See, e.g., INS v. Cardoza-Fonseca, 480 U.S.
421, 446-47, n.30 (1987) (rejecting agency interpretation
of statute on ground that interpretation was not
consistent with congressional intent, and finding
agency’s interpretation was not entitled to heightened
deference because it had been inconsistent over time).

OSM sought to justify its cramped interpretation
of VER by relying on Congress’ interest in protecting

'® See http://elips.doi.gov/app_home/index.cfm?f useaction
=home (last visited Aug. 11, 2008). This policy was recently
reaffirmed in a 2001 agency Memorandum, issued by the same
Solicitor responsible for the 1998 Solicitor’s Opinion described
above. “Binding Nature of Solicitor’s M-Opinions on the Office
of Hearings and Appeals” (Jan. 18, 2001).

25

sensitive areas, like national parks and wildlife refuges,
from the impacts of surface mining. See, e.g., Valid
Existing Rights, Final Rule, 64 Fed. Reg. 70,766 (Dec.
17, 1999)

Congress did not define VER, and the
legislative history of section 522(e)
emphasizes that, with certain exceptions,
Congress intended to prohibit new surface
coal mining operations on the lands listed in
that section. . . . We believe that these facts
argue against adoption of a rule that defines
VER solely in terms of property rights.

In OSM’s view, the concept of VER may be limited when
the resources that Congress is seeking to protect have
particularly significant values to the public. However,
OSM’s attempt at this distinction fails. The Solicitor’s
Opinion addressed VER in the National Wilderness
Preservation System — the very same federal lands
included within the scope of the protections provided
under SMCRA § 522(e) — and provides no basis to
diverge from the standard interpretation of VER.

III. INCONSISTENT DOI OPINIONS REGARDING
VER UPSET THE DELICATE BALANCE
BETWEEN DEVELOPMENT AND CONSER-
VATION

That OSM and the Solicitor, within a year, could
reach such divergent opinions about the scope of VER
demonstrates the fallacies of the D.C. Circuit’s opinion
subject to the pending petition for certiorari. The long-
standing VER policy of the Department of the Interior

26

acts as the “glue” that preserves the balance between
the competing interests of protecting pre-existing
property rights in the development of minerals on public
lands and preserving interests in conservation of the
same lands. Allowing the agency to subject the VER
standard to dramatically different interpretations
threatens the core of oil and gas exploration on federal
lands. The Supreme Court should grant certiorari in
this matter to prevent the D.C. Circuit’s decision from
dissolving that glue.

CONCLUSION

For the foregoing reasons, amici urge this Court
to grant N MA’s petition for a writ of certiorari.

Respectfully submitted,

PETER J. SCHAUMBERG
Counsel of Record

FRED R. WAGNER

BEVERIDGE & D1AMonD, PC.
1350 I Street, NW, Suite 700
Washington, DC 20005

(202) 789 6000

Harry M. Ne

ERIK MILITO

AMERICAN PETROLEUM INSTITUTE
1220 L Street, NW
Washington, DC 20005

(202) 682 8253

Counsel for Amici Curiae

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385015_0166%3A5. Public record. Not legal advice.