Petition for Writ of Certiorari — Texas Oil & Gas Corp. v. Arkla Exploration Co.

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84 -4 YO ~ OMnce Supreme Court US}

’ / F i a E D

SER—2L7 i984

ALEXANDER L. STEVag,

No. 84-490 lave

Supreme Court of the United States

OCTOBER 1984 TERM

TEXAS OIL & GAS CORP.,

Petitioner

¥.

ARKLA EXPLORATIO®™! COMPANY,

STATE OF ARKANSAS, and

WILLIAM P. CLARK, SECRETARY OF THE INTERIOR,

Respondents

ON APPEAL FROM THE UNITED

STATES COURT OF APPEALS FOR

THE EIGHTH CIRCUIT

PETITION FGR A WRIT OF

CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Bradley D. Jesson Craig R. Carver

HARDIN, JESSON & DAWSON Counsel of Record

Superior Federal Building GIBSON, DUNN & CRUTCHER

Rogers Avenue & 16th St. Charles J. Meyers

Fort Smith, Arkansas 72902 John A. Carver, Jr.

(501) 783-6186 Pamela A. Ray

1801 California Street,

42nd Flocr

Denver, Colorado 80202

(303) 298-7200

Attorneys for Petitioner

I. QUESTIONS PRESENTED

1. Where two circuit courts of appeals have issued con-

tradictory mandates to the Secretary of the Interior—one

requiring him to reinstate Petitioner’s federal oil and gas leases,

the other barring him from doing so—should this Court

exercise its supervisory jurisdiction to provide a final resolution

of the Secretary’s duties and the validity of the leases in

question?

2. Does the Eighth Circuit Court of Appeals have the

power to order the Secretary of the Intenor to disobey a final

and unappealed order of the United States Court of Appeals for

the District of Columbia Circuit?

3. Did the Eighth Circuit Court of Appeals err when it

declared invalid the regulatory procedures by which the Secre-

tary of the Interior has historically classified and issued federal

ou and gas leases? Did that court further err when it affirmed

the district court’s issuance of instructions to the Secretary

ordering him to adopt a detailed, judicially-created classifica-

tion system in place of the system prescribed by the Secretary’s

long-standing regulations?

4. Did the Eighth Circuit Court of Appeals unlawfully

cloud title to all om-shore federal oil and gas leases by

discarding title principles which had previously insulated issued

federal leases from challenges brought by private parties?

II. PARTIES

The parties to the proceedings below (which included

actions in two courts of appeals, two district courts and two

agencies of the Department of Interior) were those which

appear in the caption and the following:

William Clark has been substituted as the Secretary of the

Interior pursuant to Supreme Court Rule 40.3 in place of his

predecessors, Cecil D. Andrus and James G. Watt—each of

whom served as Secretary during periods relevant to these

actions.

The States of California, Colorado, Idaho, North Dakota,

Nevada, Oklahoma, Utah, Wyoming and New Mexico were

granted leave to file a brief amicus curiae before the Eighth

Circuit Court of Appeals.

Petitioner Texas Oil and Gas Corp. has no parent com-

panies. Its subsidiaries and affiliates are as follows: B-V Gas

Gathering Systems, Inc.; Delhi Gas Pipeline Corporation; FWA

Drilling Company, Inc.; FWA Equipment & Mud Company,

Inc.; The Nueces Company; Osark Gas Pipeline Corporation;

Tonhawa Gas Processing Company; TXO Minerals, Inc.; TXO

Oil Company; TXO Production Corp.; Western Transmission

Corporation.

>28 As<2n,

il. TABLE OF CONTENTS

CONSTITUTIONAL PROVISIONS,

STATUTES AND REGULATIONS

SEE

Review of This Court Is Required to Recon-

cile the Two Appeals Courts’ Mandates

Regarding the Same Subject Matter.............

The Eighth Circuit Exceeded Its Power When

It Declared That Its Mandate Supersedes

the Mandate of the District of Columbia

EER AIO ae Cee ee

The Lower Courts Erred in Replacing the

Secretary’s Historic Method of Leasing.

Lands with Judicially Prescribed Proce-

dures of Lease Classification .................ccc.000.

The District and Circuit Court Decisions

Cloud Title to All Federal Leases by

Cancelling TXO’s Issued Leases ...................

IIT Sibsertisestnincebassnstbasiindiscansnsiiinrsshions

APPENDIX

Exhibit |:

Exhibit 2:

Exhibit 3:

Exhibit 4:

Exhibit 5:

Exhibit 6:

Texas Oil & Gas Corp. v. Andrus, 498 F.

Supp. 668 (D.D.C. 1980)

Texas Oil & Gas Corp. v. Watt, 683 F.2d 427

(D.C. Cir. 1982)

Arkla Exploration Co. v. Andrus, Civ. No. 79-

2501 (D.D.C. Oct. 10, 1980)

Arkla Exploration Co. v. Watt, 548 F. Supp.

466 ( W.D. Ark. 1982)

Arkla Exploration Co. v. Watt, 562 F. Supp.

1214 ( W.D. Ark. 1983)

Arkla Exploration Co. v. Texas Oil & Gas

Corp., 734 F.2d 347 ( 8th Cir. 1984)

IV. TABLE OF AUTHORITIES

Page

Judicial Authorities:

Arkla Exploration Co. v. Texas Oil & Gas Corp., 734 F.2d

Cg tt. | SAREE pre caren enna Cena ene 6, 11, 12, 14,

16, 18, 20, 21

Arkla Exploration Co. v. Watt, 562 F. Supp. 1214 ( W.D.

Da, TEP ncticinnniinitesicneinnaniasseminnieiaiaaiaiiaaat iin saraias * 6, 11, 15, 17

Arkla Exploration Co. v. Watt, 548 F. Supp. 466 ( W.D.

Fs SERCH ee On we NN ee 6

Arkla Exploration Co. v. Andrus, No. 79-2501 (D.D.C.

as tie. Manat esrianiceshcieiainn ins iecahcneiataietiaginnibiaaniatainigiataaniaianinatinienin 6

Arkla Exploration Co. v. Watt, No. 82-2168 (W.D. Ark.

5 I rr eee CeO ee er AUNT CERN ae 22

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402

FEO EF santcnicteerttcectntentisnistineennctibingnainaiennianiaianiadaiaiees 15

Curtis v. United Transportation Union, 648 F.2d 492 ( 8th

ts I Ds caeceetannthetciateenetniinniniatetnisanintenapitntiacininiigataNiiigiiininensinns 21

Naartex Consulting Corp. v. Watt, 722 F.2d 779 (D.C.

Cir. 1983), cert. denied sub nom. Naartex Consulting

Corp. v. Clark, ........ $ Gee , 52 U.S.L.W. 3844, 104

he a AEE TIED caictivinniisemsinincibiniaesinicinteaiaidiibieaasiiia teins 21,22

Pan American Petroleum Corp. v. Pierson, 284 F.2d 649

( 10th Cir. 1960), cert. denied, 366 U.S. 936 (1961) ........ 18

Pullman v. Chorney, 712 F.2d 447 ( 10th Cir. 1983) 0.0.0.0... 22

Texas Oil & Gas Corp. v. Watt, 683 F.2d 427 (D.C. Cir.

___ | ARRAS IID Rect een OO aR 6, 8, 10, 11, 12

Texas Oil & Gas Corp. v. Andrus, 498 F. Supp. 668

SRR ee ee ee 6,9

Wann v. Ickes, 92 F.2d 215 (D.C. Cir. 1937) ...........e cease 17, 18

West v. Standard Oil Co., 278 U.S. 200 (1929) .0....... 18

Statutes:

30 U.S.C. §§ 181 et seg. (1976) [Mineral Leasing Act of

TT ssctiissaheihibtindisiehisiatichiieeitehha lalla id i aetna 14, 21

30 U.S.C. § 189 (1976) [§ 32, Mineral Leasing Act of

i TERI schesioiseieiieaiasiibiticeeiiehaiiietai stad al i ai ini 7,15,17

30 U.S.C. § 226 (1976) [§ 17, Mineral Leasing Act of

1920] sialic inc caieteeblandianbcneblititainahdnbabialiablipibininiibiidattinaierslinn 7,8

30 U. Th BO Cie Diiniitnainnnhienitcaiibibdbiiianhindinhiniinstninnn 8

30 U.S.C. § 226-2 (1976) [§ 42, Mineral Leasing Act of

1520. Pub. L. No. 86-705, § 5, 74 Stat. 790] ............... #, Xan, at

Pa We Pe 6 OOD saciieinerhaihdiasinncsebiecsitanaiiniindinlitintiatiiipassinnctonn 6

a ae 8 OID i cniceinctsptinnipienthnnnicanninnintcegieannns 7

Be ts Oe Oe I BOI B rrcntcciccctttsesntntcctnsssacsenccerenens 6

28 U.S.C. § 1346 (1976 & Supp. V 1981)... ee 6

Se es Te IIE I i shih alice calpicinceianinininaniibbdienbindieinnadicnns 6

ee eee NP © ST ahh ictcnltetehehisesinligatlaknitacideiaicaabnnie 6

Page

Code of Federal Regulations:

Oe re 9, 20

pe | Th: | ee eee een eee 8

Congressional Materials:

Pw Cs Fe CCU, OR, BDTD) cacscicccecctcntheemsettceeeiee 16

Miscellaneous:

8 Ly EEE Cerne aeRO I Ae dena ESPN: 10, 11, 12

ns a I chacabehicdeeianieetisiciitini ahi iah tailed aati ata 2

49 Fed. Reg. 26919 ( June 29, 1984) ooooeeccccccccccccccsscsseeeee 19

5 J. Moore, J. Lucas & J. Wicker, Moore’s Federal Practice

for 63 bs 5 5 SRE ee 21

Ekberg, “Federal Oil and Gas Leasing: Developments in

Selected Problems and Issues,” 29 Rocky Mtn. Min. L.

SE _, SRREE RN DOM ian Me ntetas Cota Sy TAY 19

_V. OPINIONS BELOW

The opinion of the United States District Court of the

District of Columbia in the case of Texas Oil & Gas Corp. v.

Andrus is reported at 498 F. Supp. 668 (D.D.C. 1980). The

decision of the United States Court of Appeals for the District

of Columbia Circuit reversing that decision and ordering

reinstatement of TXO’s leases is reported at Texas Oil & Gas

Corp. v. Watt, 683 F.2d 427 (D.C. Cir. 1982).

The decision of the United States District Court for the

District of Columbia dismissing Arkla’s first challenge to the

TXO leases is unreported, and is captioned Arkla Exploration

Co. v. Andrus, No. 79-2501 (D.D.C. Oct. 10, 1980) (order

dismissing case ).

The decisions of the United States District Court for the

Western District of Arkansas in the second Arkla chailenge to

the TXO leases appear at Arkia Exploration Co. v. Watt, 548 F.

Supp. 466 (W.D. Ark. 1982) and Arkia Exploration Co. v.

Watt, 562 F. Supp. 1214 (W.D. Ark. 1983). The decision of the

Eighth Circuit Court of Appeals affirming thos> decisions

appears at Ark/a Exploration Co. v. Texas Oil & Gas Corp., 734

F.2d 347 (8th Cir. 1984).

VI. GROUNDS FOR JURISDICTION

Plainuffs invoked the jurisdiction of the distmct ccurt

pursuant to 28 U.S.C. § 1331 (Supp. V 1981) (federal ques-

tion ), 28 U.S.C. § 1361 (1976) (mandamus), 28 U.S.C. § 2201

(1976) (declaratory judgment), 5 U.S.C. § 702 (1976) (judi-

cial review of administrative actions) and 28 U.S.C. § 1346

(1976 & Supp. V 1981) ( United States as a defendant).

The judgment of the Court of Appeals for the Eighth

Circuit was entered on May 7, 1984. The Order of the Court of

Appeals denying the separate petitions for reheanng filed by

the Secretary and TXO was entered on July 3, 1984, and this

Petition for Certiorari is being filed within 90 days of such date.

This Court’s jurisdiction is invoked pursuant to 28 U.S.C. §

1254(1) (1976).

Vil. CONSTITUTIONAL PROVISIONS,

STATUTES AND REGULATIONS INVOLVED

Section 17 of the Mineral Leasing Act of 1920 (30 U.S.C. §

226 (1976)) provides in relevant parts:

(a) All lands subject to disposition under this chapter

which are known or believed to contain oil or gas deposits

may be leased by the Secretary.

(b) If the lands to be leased are within any known

geological structure of a producing oil or gas field, they

shall be leased to the highest responsible qualified bidder

by competitive bidding ....

known geological structure of a producing oil or gas field,

the person first making application for the lease who is

qualified to hold a lease under this chapter shall be entitled

to a lease of such lands without competitive bidding.

Section 32 of the Mineral Leasing Act of 1920 (30 U.S.C. §

189 (1976)) provides:

The Secretary of the Interior is authorized to prescribe

necessary and proper rules and regulations and to do any

and all things necessary to carry out and accomplish the

purposes of this chapter, also to fix and determine the

boundary lines of any structure, <r oil or gas field, for the

purposes of this chapter.

Section 42 of the Mineral Leasing Act of 1920, as added

September 2, 1960, Pub. L. No. 86-705, § 5, 74 Stat. 790, (30

U.S.C. § 226-2 (1976) ) provides:

No action contesting a decision of the Secretary

involving any oil and gas lease shail be maintained unless

such action is commenced or taken within ninety days after

the final decision of the Secretary relating to such matter.

43 C.F.R. 3100.0-5(1) (1983) provides:

‘Known geological structure’ (‘KGS’) means techni-

cally the trap in which an accumulation of oil or gas has

been discovered by drilling and determined to be produc-

tive, the limits of which include all acreage that is pre-

sumptively productive.

Vill. STATEMENT OF THE CASE

Section 17 of the Mineral Leasing Act of 1920 grants the

Secretary of the Interior power to .«:‘se federally owned lands

which are known or believed to contain oil or gas deposits. In

carrying out this task, the Secretary is required to lease such

lands “without competitive bidding” unless the lands are

determined to be within a “known geological structure of a

producing oil or gas field” ( hereafter referred to as a KGS), 30

U.S.C. § 226(c) (1976).

In 1979, after determining that certain lands in Ft.

Chaffee, Arkansas were not included within a KGS, the Secre-

tary issued 20 leases by standard noncompetitive procedures to

Texas Oil and Gas Corp. (TXO), the Petitioner herein. Ap-

proximately 2 months after lease issuance a competitor of TXO,

Arkla Exploration Company ( Arkla and TXO operate the only

two gas transmission pipelines in the region), awoke to the fact

that its competitor had leased a large block of land within its

service area. This discovery did not please Arkla, which re-

sponded with a flurry of activities designed to obtain cancella-

tion of the TXO leases. Arkla convinced several Congressmen

and Senators to request that the Secretary cancel the TXO

leases (see, Texas Oil & Gas Corp. v. Watt, 683 F.2d 427, 430,

435, (D.C. Cir. 1982) ), and it filed an administrative protest

and two separate ( although identical) lawsuits in the Distnct of

Columbia and Western District of Arkansas seeking lease

cancellation. The pnmary thrust of Arkla’s contentions before

iO 6 ae

se lil aaa

Congress, the Secretary and the courts was that the TXO-leased

lands should have been included in a KGS, and therefore

should have been offered for lease competitively. Shortly after

filing its lawsuits, Arkla moved to change venue from Arkansas

to the District of Columbia and obtained a consolidation of its

two actions in the D.C. district court.

Arkla’s political and administrative protests caused Secre-

tary Cecil Andrus to order the United States Geological Survey

( USGS) to reconsider the propriety of the KGS determination.

That review concluded that the KGS boundanes had been

properly defined. The Secretary then decided to cancel the TXO

leases on grounds unrelated to the KGS issue. TXO challenged

the cancellation in an action before the United States Distnct

Court for the District of Columbia.

After administrative cancellation of the leases and while

the TXO suit before the D.C. district court was pending, the

Bureau of Land Management of the Department of the Intenor

(BLM) dismissed Arkla’s administrative protest. Arkla failed

to appeal that dismissal, although Intenor regulations require

that an appeal be taken before a protesting party can obtain a

final and judicially reviewable agency order. 43 C.F.R. § 4.411

(1983).

The district court for the District of Columbia then issued

its opinion in Texas Oil & Gas Corp. v. Andrus, 498 F. Supp.

668 (D.D.C. 1980) affirming the Secretary’s cancellation of the

TXO leases. TXO immediately appealed to the D.C. Circuit.

The same distnct court then, on its own mouon, and over the

objections of Arkia’s counsel. dismissed the separate Arkla

KGS action “without prejudice.” Arkla failed to file a protec-

tive appeal to this dismissal, despite having acknowledged in

oral argument that the effect of such a dismissal in the face of

the applicable 90-day statute of limitations set out in 30 U.S.C.

§ 226-2 ( 1976) would be to prevent later refiling of the action if

the D.C. Circuit overturned the district court’s T7XO decision.

Instead, Arkla moved to file an amicus bnef before the D.C.

Circuit for the stated ground that the ongoing TXO appeal

“‘would resolve the issue of the validity cf the leases.” Arkla

Motion for Leave To File Brief as Amicus Curiae, p. 1.

The D.C. Circuit reversed the district court, ruling that “the

leases were valid when issued,” and that “the validity of the

issued leases continues undiminished” by the Secretary’s action.

The Secretary was therefore ordered to reinstate TXO’s leases.

Texas Oil & Gas Corp. v. Watt, 683 F.2d 427, 435 (D.C. Cir.

1982).

On August 4, 1982, Arkla refiled its long-since dismissed

lawsuit. This time Arkla chose to file the action in the Western

District of Arkansas, the same venue which it had previously

described as being less appropriate than the District of Colum-

bia. Within 60 days of filing, the Arkansas district judge. over

the objections of TXO and the government, heid a four day

trial of the action and issued preliminary and permanent

injunctions barring the Secretary from complying with the

outstanding mandate of the D.C. Circuit, declaring the Secre-

tary’s KGS regulation invalid and requiring the Secretary to

revise his KGS procedures to comply with detailed standards

spelled out in the opinion. The Secretary and TXO appealed to

the Eighth Circuit, which affirmed the district court by a divided

panel. Petitions for rehearing filed by both the Secretary and

TXO were denied. This Petition is taken from the final action of

the Eighth Circuit.

IX. ARGUMENT

A. Review of This Court Is Required to Reconcile the Two

Appeals Courts’ Mandates Regarding the Same Subject

Matter.

Tunis Court’s Rule 17 lists as the first of the “special and

important reasons” for granting a wnit of certioran the circum-

stance presented “{[w]jhen a federal court of appeals has

rendered a decision in conflict with the decision of another

federal court of appeals on the same matter. . . .” Such a case is

presented by this Petition.

In issuing its decision in Texas Oil & Gas Corp. v Watt,

683 F.2d 427 (D.C. Cir. 1982), the D.C. Circuit considered the

propnety of the Secretary’s attempted cancellation of TXO’s

leases and concluded:

The first consequence that flows from our decision is

that the Fort Chaffee leases must be reinstated. We have

rejected the Secretary’s proffered rationale for cancellation;

the leases were valid when issued.

Id. at 435.

The Eighth Circuit opinion, which is the object of this

Petition, affirmed a district court decision enjoining the Secre-

tary from doing the very act which he was required to do as

“the first consequence” of the D.C. Circuit opinion. 562 F.

Supp. at 1227. In affirming that injunctive order, the Eighth

Circuit used the following rationale:

Because we hold these leases invalid notwithstanding the

timeliness of TXO’s application for them, our mandate

necessary supersedes that of the D.C. Circuit. The parties

should rot have any doubt that the instant decision now

controls this matter.

734 F.2d at 353.

As these two extracts reveal, exercise of this Court’s

supervisory jurisdiction is required to forestall the Secretary’s

being in contempt of one of the two orders, and to grant

Petitioner TXO a definitive ruling upon the current validity of

its oil and gas leases.

B. The Eighth Circuit Exceeded Its Power When It Deciared

That Its Mandate Supersedes the Mandate of the District

of Columbia Circuit.

The order of the Eighth Circuit contains a component

which, again in the language of this Court’s Rule 17, so far

departs “from the accepted and usual course of judicial pro-

ceedings . . . as to call for an exercise of this Court’s power of

supervision.” That component is the portion of the opinion

wherein the Eighth Circuit commented upon the current status

of the outstanding mandate of the D.C. Circuit and coucluded

that such mandate is no longer valid, because it is “superseded”

by the mandate of the Eighth Circuit.

The Eighth Circuit based its authority to “supersede” the

D.C. Circuit order upon an asserted right to interpret the

continuing validity and scope of the D.C. Circuit mandate:

The D.C. Circuit, however, ruled only on the timeliness of

TXO’s lease applications under applicable federal statutes

and has ordered only that TXO’s leases be reinstated *[a]s

matters stand... .” 683 F.2d at 435. That Court did not

consider the KGS issue. Its ruling presupposes that the

leases were issued in accordance with the then applicable

law and that the leased lands are not within a KGS. For

our Court to require the Secretary to offer these lands for

lease only after a lawful KGS determination does not

conflict with the decision of the D.C. Circuit, to which this

issue has never been presented.

734 F.2d at 353.

This characterization of the scope of the D.C. Circuit

mandate finds no support in the language used by that court.

The decision of the D.C. Circuit is phrased in as ugconditional a

form as is possible. Even though the D.C. Cra coed

that the district court had dismissed the Ark/a KGS challenge

without prejudice (683 F.2d at 430 n.4), it did not make its

order to reinstate TXO’s leases contingent upon Arkla’s deci-

sion to refile its dismissed lawsuit. To the contrary, the

language of the D.C. Circuit decision demonstrates that the

court agreed with Arkla’s contention that the D.C. Circuit

decision ““would resolve the issue of the validity of the [TXO]

leases.” Arkla Motion for Leave To File Brief Amicus Curiae,

p. I.

What the Eighth Circuit has done in its decision is to

arrTogate to itself the power to sit in review of the decision of the

D.C. Circuit. It has declared that although the D.C. Circuit

issued a mandate which unconditionally ordered the Secretary

to reinstate TXO’s leases, it ought to have limited the scope of

its mandate so as specifically to allow subsequent challenges to

be brought concerning other aspects of the lease issuance

process. It is every bit as much a review function to declare that

a court ought to have limited the scope of its mandate as it is to

declare that it was in error in having issued the mandate in the

first place. This principle is particularly true where, as here, the

“limitation” read into the mandate is such as to cause it to be

wholly “superseded” by a mandate which orders the very same

person to take the opposite action he was previously ordered to

take with respect to the same piece of property.

The Eighth Circuit has no power to so “interpret” a

mandate of a co-equal circuit. While it is not bound by the D.C.

Circuit’s decisional law, it has no power to enjoin a cabinet

officer of the United States from obeying a clear and uncon-

ditional order of another circuit that certain leases be reinstated.

Should this Court not correct this abuse of the Eighth Circuit’s

power by granting this Petition and issuing a final ruling on the

validity of Petitioner TXO’s leases, then the D.C. Circuit, in

turn, must decide whether to acquiesce in the attempt by the

Eighth Circuit to overrule its mandate. Petitioner asserts that it

is the unique responsibility of this Court to relieve the D.C.

Circuit of the necessity of having to declare its independence

from the review power of the Eighth Circuit.

C. The Lower Courts Erred in Replacing the Secretary’s

Historic Method of Leasing Lands with Judicially Pre-

scribed Procedures of Lease Classification.

The effect of the Eighth Circuit’s decision in this case will.

if not reversed, extend far beyond the boundaries of TXQ’s

leases. Dissenting Circuit Judge Gibson concluded that approv-

al of the “lengthy and detailed” requirements for making KGS

determinations set out in the district court opinion “means that

the court is imposing substantial restrictions on the work of the

Secretary. The record indicates that some 17,000 to 18,000

leases per year are submitted for approval. To require the

consideration of the factors required by the district court would

bring to a standstill any meaningful activity in this area.” 734

F.2d at 363 (Gibson, J., dissenting ).

Despite Judge Gibson’s warning that the majority “paints

with too broad a brush” (id. at 361), the majority failed to

restrict, modify or do anything except affirm in its entirety the

district court judgment. By so doing, the circuit court affirmed

an order which the Secretary declared to be an administrative

nightmare: “{The decision] attempts to set down certain

standards for making KGS determinations which are, in fact,

contradictory and unfounded, and which, in many frequently

encountered situations, are impossible to administer in a prac-

tical sense.”” Government Petition for Rehearing En Banc, p. 5.

The Secretary’s concern is well founded. Although the

district court conducted a four-day trial ( characterized by Judge

Gibson in dissent as de novo), it found no evidence that the

challenged KGS determination departed from the standards in

use for decades in issuing thousands of other leases. Con-

sequently, in order to accomplish its goal of cancelling the TXO

leases, the district court invalidated the Secretary’s regulatory

definition of KGS as contrary to law, notwithstanding testi-

mony of government officials that the regulatory definition had

been developed shortly after passage of the 1920 Act, and had

been adhered to consistently since.

Although invalidation of a regulation describing adminis-

trative procedures in use for over 50 years is by itself a radical

act, the district court did not stop there. Apparently the court

feared that since the KGS determination had already been

‘

‘¢viewed and approved, a simple remand to the Secretary

m’ght not ressit in a re-classification of the TXO-leased lands

us-c a KG7 status. In order to ensure that the Secretary would

reverse his prior decisions on remand, the district court took the

extra step of telling the Secretary exactly what his new regu-

lations should say. First, the court defined the term “KGS” as

being “equated with ‘domes and anticlines’.” 562 F. Supp at

i226. Then the court declared that: “In making any future KGS

determinations, the following factors, among others, need be

considered: . . . all geological data currently available to the

department... .” Jd. at 1227. At least sixteen specific items were

enumerated by the district court as requiring consideration by

the Secretary, presumably as a judicial minimum for meeting

the more inclusive standard of “all geological data.” Jd. Finally,

and completely without authority, the court grafted onto the

purely technical nature of its own KGS definition an economic

component, requiring the Secretary to give consideration to

“competitive interest” and “the clearly expressed Congressional

purpose in providing the State of Arkansas and its counties and

schools with a ‘fair’ return on the value of the lands and

minerals acquired from the State of Arkansas by the federal

government... .” Jd. at 1226-27.

Replacement of the Secretary’s long-standing adminis-

trative program with one created by the district court comports

with none of the standards of judicial review which should have

governed the district and circuit court deliberations. Determina-

tion of the scope of review of the particular agency action at

issue in this case ought to have begun with an evaluation of the

statutory language of the delegation to the Secretary found in

Section 32 of the Mineral Leasing Act. In that section Congress

delegated to the Secretary authority “to fix and determine the

boundary lines of any structure, or oil or gas field, for the

purposes of this chapter.” 30 U.S.C. § 189 (1976). This portion

of the statute was inserted in an amendment introduced on the

House floor and explained by its sponsor as follows:

Mr. Chairman, the purpose of this amendment is to

make certain that the Secretary has the nght to ascertain

and determine the boundaries of the oil structures and

fields. I think he has that nght, but in order to make it

absolutely sure, I offer the amendment.

[S]ome of the experts suggested that it [KGS] was a very

loose, ambiguous term, and if you give the Secretary the

right to define these structures and fields, it will take away

all uncertainty and ambiguity.

58 Cong. Rec. H7645 (Oct. 28, 1919) (statement of Rep.

Sinnott).

As discussed in Part D of this Argument, supra, Congress

had good reason to commit the technical fact-finding function

of KGS determinations to the non-reviewable discretion of the

Secretary. Yet even if reviewability is assumed, it is clear from

the statutory language, the congressional history and the techni-

cal and factual nature of the process that the scope of judicial

review is to be narrow. Judge Gibson, in dissent, described the

scope of review which should have been utilized by the district

court in the following terms:

{M]ore than mere error is necessary to meet the test and

... administrative action may be regarded as arbitrary and

capricious only where it is not supportable on any rational

basis. [citation omitted] Further, evidenuary conilicts

should be weighed in favor of the administrative action.

734 F.2d at 362 (Gibson, J., dissenting).

The district court and the majority of the circuit court, on

the other hand, improperly interpreted this Court’s decision in

Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402

(1971), as authority for what amounted to a de novo review in

which no deference whatsoever was afforded to the Secretary’s

regulation, procedures or the tesumony of his officials.

Moreover, the district and circuit courts took the further

step of dictating the result and the details of the rulemaking

——————

process which they necessitated by their invalidation of the

existing regulation. That result, although couched in terms of

gleaning 65-year old legislative intent, is, in fact, nothing less

than judicial legislation. The simple language of Section 32

plainly does not support the district court’s holding that the

Secretary is required by that statute to consider “all geological

data” as well as “competitive interest” and “providing the State

of Arkansas and its counties and schools with a ‘fair’ return” in

making his KGS determinations. 562 F. Supp. at 1226-27.

In casting aside the Secretary’s own program and pre-

scribing to him how to carry out the technical aspects of his

duties, the district court, as affirmed by the Eighth Circuit, has

massively intruded into the administrative domain. The result-

ing paralysis and confusion in the administration of one of our

country’s most important energy programs graphically illustrate

the merit of administrative law principles requiring judicial

restraint in reviewing agency practices and judicial abstention

from the legislative and rulemaking processes.

D. The District and Circuit Court Decisions Cloud Title to All

Federal Leases by Cancelling TXO’s Issued Leases.

Prior to this case, there was only a single reported case

delineating the role of the judiciary in reviewing challenges of

the Secretary’s KGS determinations. The D.C. Circuit ruled in

Wann vy. Ickes, 92 F.2d 215, 217 (D.C. Cir. 1937):

It is too well settled to require citation of authority that the

determination by the Secretary of a question of fact, in a

matter within his jurisdiction, is binding upon the courts.

Nor will the courts entertain an inquiry as to the extent of

his investigation and knowledge of the points decided, or

as to the methods by which he reached his determination.

De Cambra v. Rogers, 189 U.S. 119, 122....

We think that the finding of fact by the Secretary that

the lands here involved were known since 1931 to be

within the geologic structure of a producing ou and gas

field is conclusive.

The Eighth Circuit acknowledged the variance between its

holding and that of the D.C. Circuit by stating that Wann had

been overtaken by events and “does not represent the current

law.” 734 F.2d at 355, n. 11. In so ruling, the Eighth Circuit

also rejected the holding of this Court in West v. Standard Oil

Co., 278 U.S. 200, 219 (1929) that: “After issue of the patent or

other like instrument, [the Secretary’s] findings of facts are

conclusive, in the absence of fraud or mistake, not only upon

the Department, but upon the courts. . . .” Both these decisions

aruculate substantive rules of title which have been relied upon

by those who have acquired federal leases. The passage of time

ought to solidify the validity of these rules of repose, rather

than call them into question.

The interest in title security is as great in the case of oil and

gas leases as it is in any other real estate interest. Judge

Breitenstein has described the economic basis for this principle

in the following terms:

The drilling of wells requires substantial financial risks and

expense of putting those wells on production and of

marketing the product is burdensome. If the continued

existence of the granted leasehold estate is dependent upon

the fluctuating policies of governmental departments

uninhibited by any limitations upon time of action, the

value of federal oil and gas leases as a ttle basis for oil and

gas development is greatly diminished if not practically

destroyed.

Pan American Petroleum Corp. v. Pierson, 284 F.2d 649, 655

(10th Cir. 1960), cert. denied, 366 U.S. 936 (1961).

The Secretary has been cognizant of the government’s

long-term interest in conveying good ttle to its leases and has

accordingly never asserted the nght to cancel an issued lease for

mistake in making a KGS determination. This case introduces

an entirely new cloud on the title of federal leases. Under it the

governmment’s procedures can be reexamined—regardless of

limitations upon time of action—by strangers to the lease and

over the government’s objections.

In analyzing the distric* court’s opinion, one commentator

has noted:

If this aspect [the detailed new procedures for the

KGS determination process] of the decision in Arkia is

upheld, title security to federal oil and gas leases . . . will be

jeopardized. ... [O]ne of the cornerstones of title security

to a lease issued non-competitively has been reliance upon

the determination of the Department that none of the lands

covered by the lease was within a known geologic structure

on the date of the lease issuance. . . . If upheld on appeal,

the decision in Arkia may mean that it is no longer possible

to rely upon the determination by the Department that

lands are [non-KGS] because that determination may be

subject to challenge, even after leases have been issued and

the appeal period to challenge issuance of the leases has

expired.

Ekberg, “Federal Oil and Gas Leasing: Developments in

Selected Problems and Issues,” 29 Rocky Mtn. Min. L. Inst.

589, 639-40 (1983).

Of immediate concern to leaseholders such as TXO is the

fact that ail on-shore federal leases, whether issued com-

petitively or noncompetitively, were issued in accordance with

procedures which the district court and the Eighth Circuit have

now declared invalid. As such, they are subject to challenge and

cancellation by competitors on the same basis as TXO’s Ft.

Chaffee leases.

Furthermore, the Secretary will be effectively barred from

going forward with his announced plans to offer future non-

competitive leases pursuant to procedures which he amended

and implemented under the authonty of the regulation which

the Eighth Circuit declared to be invalid. 49 Fed. Reg. 26919

(June 29, 1984). He will instead be required to impose a

moratorium on leasing untul new regulations and procedures

are devised which attempt to comply with the district court and

Eighth Circuit opinions. Of course, even after the Secretary

attempts to comply with these courts’ orders, the decision in this

cas2 will invite constant litigation to determine whether he

properly considered “all” geologic data available to him and ali

evidence of “competitive interest.”

The ability of private parties to accept the lower courts’

invitation to challenge the validity of issued federal leases will

be further enhanced by those portions of the Eighth Circuit and

district court opinions which do not deal directly with the KGS

issue. Prior to issuance of the decision in this case various

doctrines of repose ‘nsulated federal lessees from challenge by

private parties. As a result, lessees believed, and their title

lawyers were willing to opine, that federal leasehold titles were

sufficiently secure to warrant expenditure of large amounts of

risk capital on development of the leases. Application of these

doctrines ought to have resulted in dismissal of Arkla’s suit. The

opinions below discarded these doctrines, thus lessees in the

future will be unable to assure themselves that their leases are

any more insulated from challenge than were TXO’s leases at

Ft. Chaffee.

They will, for example, no longer be abie to rely upon the

need of potential lease challengers to avail themselves of, and

exhaust ail, administrative remedies prior to filing a judicial

challenge to leasehold validity. In this case, after filing a

“protest” with the BLM, Arkla allowed that case to be dis-

missed without appeal. Departmental rules require that failure

to appeal within 30 days bars a challenger from further

pursuing its requested relief. 43 C.F.R. § 4.411 (1983). Yet the

Eighth Circuit allowed Arkla and the State of Arkansas success-

fully to pursue a judicial appeal on the grounds that: “When the

D.C. Circuit then issued a mandate ordering the Secretary to

reinstate the leases, it became highly improbable that the State

of Arkansas could ever obtain relief in the context of an

admunistrative proceeding.” 734 F.2d at 355.

Nor will lessees in the future be entitled to rely upon the

90-day statute of limitations set out in 30 U.S.C. § 226-2

(1976). Plaintiffs failed to bring this action within the 90-day

period, and yet they vere not barred from filing this action.

Instead the Eighth Circuit ruled that Arkla’s prior suit and the

Secretary’s illegal cancellation order tolled the statute for over

three years. Yet Arkla allowed its prior action to be dismissed,

without appeal. Dismissal of a suit, even without prejudice, has

always (until issuance of the opinion in this case) meant that

the time during which it was pending no longer serves to toll an

applicable statute of limitations. Curtis v. United Trans-

portation Union, 648 F.2d 492, 495 (8th Cir. 1981); J. Moore,

J. Lucas & J. Wicker, Moore’s Federal Practice § 41.05[2] at

41-76 & -77 (2d ed. 1982). The circuit court opinion reversed

this hitherto unchallenged proposition and also heid that during

the period of time in which the Secretary’s illegal lease cancella-

tion was in force the statute was also tolled. Even more

incredibly, the decision went on to hold that since neither

period alone tolled the statute long enough to allow Arkla to

bring its Arkansas action, both may be tacked together to

accomplish this result because “[t]he Secretary has known

since September, 1979 of Arkla’s opposition to these leases.”

734 F.2d at 356.

This holding nullifies Congress’ statute of limitations by

equating it with the doctrine of laches. Moreover, it does so

even where laches would probably bar Arkla’s action because it

failed to take the simple step of filing a protective appeal of the

dismissal uf its lawsuit in the D.C. district court.

In addition, lessees will not be able to rely upon the

principle that Congress delegated exclusive power over admin-

istration and policing of the leasing program to the Secretary.

Prior to this opinion the two circuits which had considered the

issue had concluded tinat no private nght of action exists under

the Mineral Leasing Act because “{t]he Secretary, and not the

citizenry at large, was intended to oversee the proper allocation

and development of the public lands.” Naartex Consuiting

Corp. v. Watt, 722 F.2d 779, 790 (D.C. Cir. 1983), cert. denied

sub nom. Naartex Consulting Corp. v. Clark, ........ US.

valentin , 52 U.S.L.W. 3844, 104 S. Ct. 2399 (1984). Accord,

Pullman v. Chorney, 712 F.2d 447, 449-50 (10th Cir. 1983).

In this decision, however, the Eighth Circuit has elevated

Arkla, a disappointed competitor with no claim of interest in

the lease, into private attorney general status, free of the

procedural restrictions on bringing suit prescribed by principles

of exhaustion of administrative remedies, statutes of limitations.

standing and collateral estoppel. At the behest of this private

party, the courts have re-written the Secretary’s procedures and

Congress’ policies respecting whether lands should be leased

competitively or noncompetitively, and countenanced after the

fact scrutiny of validity of issued government leases based on

arguments of “fair return.” If not reversed this decision will

lead to the result which was predicted by government witnesses

at trial: investment in and exploration on federal lands will be

discouraged, delayed and made more expensive. Thus, rather

than resulting in a greater return for the government, this

decision will result in a lessening of the value of all its oil and

gas interests.

X. CONCLUSION

Testrmony in this case established that over 90% of all

federal revenues from onshore federal oil and gas leases are

derived not from lease bonus payments, but from payment of

royalties. Trial Transcript, Vol. [I at 771-72, Arkia Exploration

Co. v. Watt, No. 82-2168 (W.D. Ark. Sept. 30, 1982) (test-

mony of Mr. Zimmerman). Cognizant of this fact, Congress

and the Secretary have believed it of paramount importance to

encourage prompt exploration of and production from the

federal lanes.

The effect of the decision below is to indefinitely delay

leasing of federal lands until a whoily new and unworkable

regulatory system is adopted and put in place. The decision will

also so sloud the title to federal leases that even after new

procedures are devised, the value of those leases will be

substantially reduced and the ability of exploration companies

to dnli on them will be impaired.

This Court ought not to allow its lower courts to so

interfere with the workings of a long-standing administrative

program. Nor shouid it allow its lower courts to become so pre-

occupied with perceived administrative failures that they are

willing to attempt to overrule the mandate of another court of

appeals. Grant of the writ sought by this Petition will allow the

Court to redress these errors.

Respectively submitted,

Gipson, DUNN & CRUTCHER

Charies J. Meyers

John A. Carver, Jr.

Craig R. Carver

1801 California Street,

42nd Floor

Denver, Colorado 80202

(303) 298-7200

Attorneys for Petitioner

Texas Oil & Gas Corp.

Exhibit |:

Exhibit 2:

Exhibit 3:

Exhibit 4:

Exhibit 5:

Exhibit 6:

APPENDIX

Texas Oil & Gas Corp. v. Andrus, 498 F. Supp. 668

(D.D.C. 1980).

Texas Oil & Gas Corp. v. Watt, 683 F.2d 427

(D.C. Cir. 1982)

Arkla Exploration Co. v. Andrus, Civ. No. 79-2501

(D.D.C. Oct. 10, 1980).

Arkla Exploration Co. v. Watt, 548 F. Supp. 466

(W.D. Ark. 1982).

Arkla Exploration Co. v. Watt, 562 F. Supp. 1214

(W.D. Ark. 1983).

Arkla Exploration Co. v. Texas Oil & Gas Corp.,

734 F.2d 347 ( 8th Cir. 1984).

ee ee ae

———

EXHIBIT 1

498 Federal Supplement 668

TEXAS OIL & GAS CORP., Plaintiff,

Cecil ANDRUS, Defendant,

Civ. A. No. 79-2976.

United States District Court,

District of Columbia.

Sept. 25, 1980,

As Amended Sept. 26, 1980.

In action by lessee challenging decision of Secretary of

Interior to cancel its non-competitive oil and gas leases within

military reservation, the District Court, Joyce Hens Green, J.,

on cross motions for summary judgment, held that: (1)

Secretary could revoke leases because lease applications,

although coming after effective date of statutory amendment

eliminating prohibition against all oil and gas leases on military

reservation, were submitted prior to effective date of change in

implementing regulation, based on his reasonabie _inter-

pretation of department regulation to require rejection of

applications in that they sought leasehold interest in land “not

* * subject * * * to the operation of public land laws”; (2)

Secretary was not estopped from invalidating leases, based on

oral representations of officials of Bureau of Land Managemient

about validity of applications filed; and (3) evidence was

insufficient to establish that Secretary’s decision was improper

as rendered for political rather than policy reasons.

Defendant’s motion granted.

See also, 498 F.Supp. 677.

1. Mines and Minerals —5.1(7)

Absent any congressional enactment withdrawing such

authority, it is within power of Secretary of Interior to cancel

administratively any lease that was invalid from its inception

because it was issued in violation of department regulations or

statute.

2. Mines and Minerals —5.1(7)

There being nothing in Mineral Leasing Act for Acquired

Lands that in any way deprives Secretary of Interior of

authority to cancel leases issued in violation of statute or

regulation, under proper circumstances Secretary could exercise

such power to invalidate oil and gas leases. Mineral Leasing

Act for Acquired Lands, § 2 et seq. as amended 30 U.S.C.A.

§ 351 et seq.

3. Administrative Law and Procedure —413

Judicial deference to which agency’s interpretation of its

own regulation is awarded is great, such that if several reason-

able interpretations are available, agency’s construction need

only be one of those, and not necessarily the most reasonable of

alternative interpretations.

4. Mines and Minerals —5.1(7)

Secretary of Intenor could revoke previously issued

noncompetitive oil and gas leases within military reservation

because lease applications, although coming after

[498 F.Supp. 669]

effective date

of statutory amendment eliminating prohibition against all oil

and gas leases on military reservation, were submitted pnor to

effective date of change in implementing regulation, based on

his reasonable interpretation of department regulation to re-

quire rejection of applications in that they sought leasehold

pee en a et ee eer

interest in land “not * * * subject * * * to the operation of

public land laws.” Mineral Leasing Act for Acquired Lands, § 3

as amended 30 U.S.C.A. § 352.

5. Constitutional Law —320.5

Where Secretary of Interior invalidated leases that were

issued subject to cancellation for strictly legal deficiency, failure

to afford hearing prior to cancellation did not violate due

process under either Fifth Amendment or Administrative

Procedure Act. 5 U.S.C.A. §§ 553, 554; U.S.C.A. Const.

Amend. 5.

6. Estoppel —62.1

Doctrine of estoppel is to be applied to government only in

most extraordinary circumstances and with greatest care and

circumspection.

7. Estoppel —62.1

Party asserting estoppel against the government must not

only establish traditional elements of false representation,

purpose to invite action by party to whom representation was

made, ignorance of true facts by that party and reasonable

reliance, but must also make showing of injustice to him and

lack of undue damage to public interest.

8. Estoppel —62.2(4)

Secretary of Interior was not estopped from invalidating

previously issued noncompetitive oil and gas leases based on

oral representations of officials of Bureau or Land Management

about validity of applications filed, since lessor’s reliance could

hardly be called reasonable in light of Interior Department’s

comments which placed lessor on notice of possibility of

Department interpretation of pertinent regulation in line with

that ultimately made by Secretary; moreover, decision of

Secretary was not contrary or detrimental to public interest in

equitable re-leasing of public lands. Mineral Leasing Act for

Acquired Lands, § 3 as amended 30 U.S.C.A. § 352.

9. Mines and Minerals —5.1(7)

Evidence of letters submitted by Secretary of Interior by

various congressmen and senators and implication ansing from

timing and subject matter of subcommittee hearing, although

regrettable, was insufficient, when taken as a whole, to establish

that Secretary of Interior’s decision to revoke previously issued

noncompetitive oul and gas leases was improper as rendered for

political rather than policy reasons.

Jason R. Warran, James W. McDade, Washington, D. C.,

Bradley D. Jesson, Ft. Smith, Ark., Craig R. Carver, Denver,

Colo., for plainuff.

Andrew F. Walch, Lands Div., Dept. of Justice, Washing-

ton, D. C., for defendant.

MEMORANDUM OPINION

JOYCE HENS GREEN, District Judge.

Presented by the parties’ pending cross-motioons for sum-

mary judgment are the questions of the validity of the Novem-

ber 1, 1979, action of defendant Cecil D. Andrus, Secretary of

the United States Department of the Interior, in canceling

certain oil and gas leases issued on a noncompetitive basis to

plaintiff Texas Oil & Gas Corporation for lands located on the

milit reservation of Fort Chaffee, Arkansas, and, if such

cancellation were improper, the validity of the Secretary’s

September 20, 1979, decree that delayed indefinitely the is-

suance to plaintiff of the permits required to begin dniling for

oul and gas on the land at Fort Chaffee. Only the former issue

need be addressed, however, since a thorough review of the

el Bs al AS er IS.

record in this action not only reveals that there are no material

facts at issue, but also compels the conclusion that the Secre-

tary’s action invalidating the leases was not improper. Accord-

ingly, defendant’s mction for summary judgment will be grant-

ed and judgment entered in his favor and against the plaintiff.

[498 F.Supp. 670]

Because of their importance in the resolution of the issues

presented, initial explanation of the statutory and regulatory

schemes under which oil and gas leases are issued is required.

The lease agreements in question in this litigation involved

approximately 40,000 acres of federal property classified as

“acquired” lands, that is, lands which are acquired by the

United States through purchase or other transfer fro.n a state or

private individual, usually for dedication to a particular use. In

contrast to such acquired lands are “public domain” lands,

which are owned by the United States by virtue of its sover-

eignty. The distinction between these types of federal real

estate is important in that, as a matter of historical perspective,

it was the basis for the evolution of the present statutory scheme

through which the Congress has delegated responsibility to the

Secretary of the Interior for the leasing of federal lands for

mineral development.

The authority of the Secretary to administer the grants of

mineral rights on public domain lands has been recognized by

Congress since the middle of the last century, see, e. g., Act of

July 26, 1866, ch. 262, 14 Stat. 251 (currently codified as

amended at scattered sections of 30, 43 U.S.C. ); Act of May 10,

1872, ch. 152, 17 Stat. 91 (currently codified as amended at 30

U.S.C. §21 ef seq.), although it was not until 1920 that

Congress began to authorize the present system of leasing such

lands for oil and gas exploration and production by the

Secretary, Mineral Leasing Act of 1920, Pub.L. No. 146, ch. 85,

41 Stat. 437 (1920) (currently codified as amended at 30

U.S.C. § 181 et seg.). Acquired lands had been leased on an ad

hoc basis for some time, but it was not until 1947 that

legislation was passed specifically giving the Secretary authority

to lease such property. Mineral Leasing Act for Acquired

Lands, Pub.L. No. 382, ch. 513, 61 Stat. 913 (currently codified

as amended at 30 U.S.C. § 351 ef seq.).

Of the provisions of that enactment providing for the

leasing of acquired lands, most pertinent to this case is its

language, found in section 352 of title 30 of the United States

Code, denoting which acquired lands are subject to lease. As

originally passed, it provided:

[A]ll deposits of ... oil [and] gas... which are owned or

may hereafter be acquired by the United States and which

are within the lands acquired by the United States (ex-

clusive of such deposits in such acquired lands as are (a)

situated within incorporated cities, towns and villages,

national parks and monuments, (b) set apart for military

or naval purposes, or (c) tidelands or submerged lands)

may be leased by the Secretary [of the Interior] under the

same conditions as contained in the leasing provisions of

the mineral leasing laws, subject to the provisions hereof.

... No mineral deposit covered by this section shall be

leased except with consent of the head of the executive

department . . . having jurisdiction over the lands contain-

ing such deposit ....

30 U.S.C. § 352 (1970) (emphasis supplied). This congres-

sional mandate that acquired lands set aside for military

purposes be <xiuded from those acquired properties that could

be leased was continued untul 1976 when section 352 was

amended to delete that exemption. Federal Coal Leasing

Amendments Act of 1975, Pub.L.No. 94-377, § 12, 90 Stat.

1090 (1976), codified at 30 U.S.C. §352 (1976). That

amendment precipitated the circumstances that have culmi-

nated in this litigation.

ancl on eben ths dione

On May 9, 1977, some nine months after the effective date

of the amendment to section 352, plaintiff Texas Oil & Gas filed

applications for thirty-eight noncompetitive oil and gas leases

on an area of 78,962.73 acres within the boundaries of Fort

Chaffee, Arkansas.' These offers were the

[498 F.Supp. 671]

first noncompetitive

applications to lease these federal acquired lands set aside for

military purposes following the 1976 amendment.

Not long after the congressional change in section 352 in

1976, action was taken by the Department of Defense and the

Department of the Interior, the agencies most directly involved,

to amend their applicable regulations. A little over one month

after the lease applications were filed by Texas Oil & Gas, the

Corps of Engineers, despite the recent revision of section 352

enacted in the Federal Coal Leasing Amendments Act, pub-

lished proposed regulations that would have continued its past

prohibition on leasing acquired lands set aside for military

purposes for oil and gas exploration and production. 42 Fed.

Reg. 31036 (1977). On September 16, 1977, the Department

of the Interior responded to the amendment to section 352 by

publishing a proposed change in its regulation concerning

acquired lands, 43 C.F.R. § 3101.2-1. As it was in effect at the

time of the passage of the Federal Coal Leasing Amendments

Act, that regulation declared in pertinent part:

' Leases are to be issued only after competitive bidding for those

lands located on a known geological structure of a producing oil and

gas field while those lease applications for lands not on such a known

structure can simply be granted to the first qualified bidder at his

offered price. 30 U.S.C. §§ 226(b)-(c), 352 (1976). Although the

validity of the United States Geological Survey’s determination that

the lands on Ft. Chaffee for which pliainuff was granted leases were

at within a known geological structure has come under attack both

before the agency and before this Court, see p. 673 infra, that issue is

not presented in this litigation.

§ 3101.2-1 [Acquired] Lands to which the Act does not

apply.

* * . * * .

(f) Set apart for military or naval purposes, including

lands within naval petroleum and oil shale reserves ....

43 C.F.R. § 3101.2-1(f) (1977). The regulation proposed by

the Department of the Interior was to amend subsection (f) to

modify its reference to all acquired lands set aside for military

purposes so as to include only those “{ w Jithin naval petroleum

and oil shale reserves and within the National Petroleum

Reserve in Alaska.” 42 Fed.Reg. 46558 (1977). It was also

stated in the Federal Register notice accompanying the pro-

posed rule change:

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. This proposal would remove the regulatory

prohibition and open these lands for mineral leasing under

the same terms and conditions as apply to other acquired

es sus

Id.

Comments on their proposed regulations were requested

and received by both the Corps of Engineers and the Depart-

ment of the Interior, which included comments by plaintiff

concerning the proposed change in section 3101.2-1. On July

10, 1978, the final rules of the Corps of Engineers and the

Department of Defense were published in which it was in-

dicated that the Corps of Engineers was willing to consider

leasing of acquired military lands so long as it did not impair

“the adequate utilization of the lands for the primary purposes

for which they have been acquired or are being admunis-

tered.” 43 Fed.Reg. 29752 (1978), codified at 32 C.F.R.

§ 643.35(a)(1) (1980). As to the Intenor Department’s

proposed change in 43 C.F.R. § 3101.2-1, a final rule adopting

the amendment to subsection (f) was published on August 22,

1978, to be effective September 21, 1978. 43 Fed.Reg. 37202

(1978). In the department’s comments on the rule, it was

indicated that together the Department of Defense and the

Department of the Interior would “determine the suitability of

the land for mineral leasing and development on a case by case

or area by area basis before the Secretary of the Interior issues a

lease.” Id.

With regard to the validity of the piaintiff’s lease appli-

cations, because they were filed before the effective date of the

Interior Department’s regulation concerning leasing of acquired

lands used for military purposes, some uncertainty existed in

the department about their validity, as a senes of docu:nents

filed by the parties indicate. Submitted io the Court is a copy of

a letter, the orginal of which was submitted to the Department

of Defense by Amoco Production Company as a comment to

the department’s proposed rule prohibiting the leasing of

acquired lands used for military purposes. In that letter it is

explained how Amoco Produc-

[498 F.Supp. 672]

tion, like Texas Oil & Gas, had

filed lease applications just after the amendment to section 352.

On the copy of the letter is a handwnitten note signed by an

attorney of the Department of Interior assigned to the drafting

and comment-analyzing of the regulatory change proposed foe

section 3101.2-1, which states:

Dave, have you seen this? These offers are premature and

probably should be rejected under Section 2091, but we'd

better give some thought to whether we'll have a simo

period or an over-the-counter crunch when the final rule is

effective. Larry McBnde x4803.

Exhibit C to Plaintiff's Motion for Summary Judgment ( filed

Jan. 18, 1980). 43 C.F.R. § 2091 rererred to in the note, the

applicability of which is contested by the parties, states:

Except where regulations provide otherwise, all appli-

cations must be accepted for filing. However, applications

which are accepted for filing must be rejected and cannot

be held pending possible future availability of the land or

interests in land, when approval of the application is

prevented by:

(e) The fact that for any reason the land has not been

made subject, or restored, to the operation of the public

land laws.

43 C.F.R. § 2091.1(e) (1979). Seemingly in opposition to this

viewpoint is a memorandum dated July 31, 1978, from the

Associate Solicitor of the Energy and Resource Division of the

Department of the Interior to the Assistant Secretary of the

Land and Water Resources Division concerning the final rule

that was published in August 1978 in which it was stated:

l. As written, the rule assumes that the many lease

applications filed soon after the statute was passed are

valid applications, even though they preceded this rule-

making. The rule thus gives these applications prionty

over those filed after the rulemaking is published. While

we believe this is lawful, it is an open question that may

later be disputed by two applicants before the Board of

Land Appeals.

Exhibit D to Plainuffs Motion for Summary Judgment ( filed

Jan. 18, 1980). Fimally, on March 1, 1979, the Associate

Director of the Bureau of Land Management (BLM) issued

Instruction Memorandum No. 79-287 to ail State Directors

advising them of the change in section 352 and the final

reguiation published in August 1978, and suggesting that the

directors “process the noncompetitive offers and applications

(other than coal and lignite) filed after the effective date of the

act, that is August 4, 1976, on a first-come-first-served basis in

the same manner as other noncompetitive offers on applications

for acquired lands.” Exhibit I to Plainuffs Motion for Sum-

mary Judgment ( filed Jan. 18, 1980).

Accordingly on June 26, 1979, the offers of Texas Oil &

Gas were accepted by the Chief of the Division of Lands and

Minerals of the Bureau of Land Management on behalf of the

United States and, with the consent of the Corps of Engineers,

the twenty leases now in question were granted to plaintiff with

an effective date of July 1, 1979. These ten-year leases covered

approximately 33,000 acres at a cost of one dollar per acre.

On August 8, 1979, Senator Dale Bumpers of Arkansas

wrote a letter to Secretary Andrus in which he questioned the

propriety of the issuance of the leases, requested suggestions

from the Secretary about legislative changes or amendments to

modify the system of lease allocation to remedy what Senator

Bumpers felt were inequities and abuses of the system, in-

formed Secretary Andrus that he was requesting a hearing

before a Senate subcommittee to examine the entire matter, and

urged that no further noncompetitive leases be issued by the

department in the interim. Exhibit R to Plaintiffs Motion for

Summary Judgment (filed Jan. 18, 1980). A second letter,

dated August 10, 1979, was also sent by Senator Bumpers to the

Secretary, again

[498 F.Supp. 673}

raising questions about the issuance of the

leases to plainuff and stating that hearings had been scheduled

before the Subcommittee on Energy Resources and Materials

Production for September 12, 1979, to gather information

about the authonty and regulatory scheme under which the

leases were issued and to examine the need for legislative action

to amend the leasing procedure. Jd. Exhibit S. By letter dated

August 14, 1979, Senator Wendell Ford of Kentucky, the

Chairman of the Energy Resources Materials Production

Subcommittee, advised the Secretary of the September 12

hearing date. Jd. Exhibit T.

On August 13, 1979, the Secretary sent a letter in reply to

Senator Bumper’s correspondence of August 8 in which he

defended the Intenor Department’s action in granung the

noncompetitive leases to Texas Oil & Gas despite the filing of

the lease applications prior to the effective date of the regu-

latory change in 43 C.F.R. §3101.2-1 and made certain

legislative recommendations. Jd. Exhibit K. Subsequently, at

the September 12 hearing, Interior Department officials again

defended the issuance of the leases as proper since the Texas

Oil & Gas applications were filed after the date of the amend-

ment of section 352. Jd. Exhibit Z.

Following the hearing additional correspondence was sub-

mitted to Secretary Andrus concerning the Texas Oil & Gas

leases. On September 13, 1977, a letter signed by Senator

Bumpers, Senator Ford, Senator Henry Jackson of Washington,

and Senator Henry Bellmon of Oklahoma was sent to the

Secretary in which the issuance of the leases to Texas Oil & Gas

was criticized on a number of grounds, including the decision to

process the applications despite the fact they were filed before

the final revision of section 3101.2-1. Jd Exhibit U. The

Senators also requested that a moratorium be placed on the

further issuance of noncompetitive leases within military reser-

vations until such time as administrative and legislative changes

had been made in the leasing system. Jd. On September 14,

1979, Senator Bumpers wrote again to request information on

lease assignments and, in the course of that letter, generally

criticized the system for the issuance of noncompetitive oil and

gas leases. Jd. Exhibit V. On September 17, 1979, Senators

Bumpers, Jackson, and Bellmon again wrote the Secretary to

urge that he impose a moratonum on the issuance of

noncompetitive leases and that he review the circumstances

surrounding the granting of the Texas Oil and Gas leases with

an eye toward canceling them. Jd. Exhibit W.

On September 17, 1979, Arkla Exploration Company filed

a protest with the department to challenge the Texas Oil & Gas

leases. Arkla also instituted litigation before this Court four

days later to challenge the issuance of the leases, which is now

in abeyance pending the outcome of this suit. Arkla Explor-

ation Co. v. Andrus, Civ. No. 79-2501 (D.D.C. filed Sept. 21,

1979). See note | supra.

On September 20, 1979, the Secretary promulgated an

order that placed a “hold” on the issuance of any permits to

drill on the land leased to Texas Oil & Gas and asked the

United States Geological Survey (USGS) to re-evaluate its

initial determination that the leased lands were not part of a

“known geological structure” (KGS), an important factor in

allowing the leases to be issued noncompetitively. Exhibit AA

to Plaintiff's Motion for Summary Judgment (filed Jan. 18,

1980). See note 1 supra. Apparently unaware of the Secre-

tary’s order, Texas Oil & Gas filed an application for a permit

to dnll with the USGS that same day. Jd. Exhibit BB.

Although the application was found technically sufficient, by

letter dated October 5, 1979, USGS refused to issue the permit

because of the Secretary’s September 20 order. Jd. Exhibit CC.

Plaintiff filed another application to drill on a second location at

Fort Chaffee on October 9, 1979, but USGS again declined to

issue the permit because of the Secretary’s order. Jd. Exhibits

DD, EE. Also on October 9, USGS reported to the Secretary

that its initial determination concerning the non-KGS status of

the Ft. Chaffee lands was correct. Jd. Exhibit II.

[498 F.Supp. 674]

Further congressional correspondence in support of and in

opposition to plaintiff's leases was submitted to the Secretary

following his September 20 order. On September 28, 1979,

Texas Representatives Jim Wright and Martin Frost and Sena-

tor Lloyd Bentsen of Texas wrote to the Secretary. Attachment

4 to Defendant’s Motion for Summary Judgment (filed Mar.

14, 1980). While declining to comment on the pending validity

of the Texas Oil & Gas leases, they nonetheless sought to bing

to the Secretary’s attention the circumstances surrounding a

dispute between Texas Oil & Gas and Arkla Exploration

Company concerning a Texas Oil & Gas application for a

permit to build a gas pipeline in Arkansas that was pending

before the Federal Energy Regulatory Commission. Jd. On

October 1, 1979, Senator Russell Long of Louisiana wrote to

Secretary Andrus to urge the cancellation of plaintiffs leases.

Exhibit X to Plaintiff's Motion for Summary Judgment ( filed

Jan. 18, 1980). Finally, on October 25, 1979, Senator Long

and Senator J. Bennett Johnston of Louisiana wrote to the

Secretary on behalf of Arkla Exploration Company to “clarify”

the record regarding the gas pipeline case before the Federal

Energy Regulatory Commission and to urge the Secretary to

reach a decision to cancel the plaintiff’s leases on Fort Chaffee.

Id. Exhibit Y.

On November 1, 1979, plaintiff instituted this action,

seeking as immediate relief a temporary restraining order to

prevent the Secretary from administratively canceling the leases

at issue. A hearing date for the application for a temporary

restraining order was set for the morning of November 2, 1979.

Although the Secretary was informed of that hearing date, on

the evening of November |, he signed an order rescinding

plaintiff's leases because the lease applications were submitted

prior to the effective date of the change in 43 C.F.R. § 3101.2-1

and thus had to be rejected under 43 C.F.R. § 3091.1. /d@

Exhibit FF. The following day, the Court denied the motion

for a temporary restraining order but granted plaintiff leave to

amend its complaint to encompass the events of the previous

evening. At the hearing on November 2, the Court was assured

by the Government that the lands at Fort Chaffee would not be

leased pending the disposition of this lawsuit.

On January 3, 1980, the United States Geological Survey

returned plaintiff's two applications for permits to drill, stating

that they could not be processed further because of the

cancellation of the leases. Attachment 6 to Defendant’s Motion

for Summary Judgment (filed Mar. 14, 1980). On February

29, 1980, the Secretary issued an order, effective until further

i at as an ambinsnoen sepia.

notice, suspending the issuance of all onshore noncompetitive

oil and gas leases on both public domain and acquired lands.2

Id. Attachment 5. On March 6, 1980, defendant tendered to

plaintiff a United States Treasury check in the amount of

$40,434.85 representing the advance paid by plaintiff in con-

nection with its initial applications to lease.

Plaintiff challenges Secret2zy Andrus’ decision to cancel its

leases on the lands at Fort Chaffee, a final, administrative order

appealable to this Court, on a number of different grounds, any

of which, it urges, is sufficient to compel a judicial reversal of

that determination and the reinstatement of the leases. In-

itially, Texas Oil & Gas argues that the Secretary’s inter-

pretation of 43 C.F.R. § 3101.2-1 was erroneous because it was

the 1976 amendment to 30 U.S.C. § 352, not the change in

section 3101.2-1, that opened the lands at Fort

[498 F.Supp. 675]

Chaffee to

leasing, rendering improper defendant’s invocation of 43

C.F.R. § 2891.1 to reject the leases.

[1,2] It is well-established that, absent any congressional

enactment withdrawing such authority, it is within the power of

the Secretary of the Interior to cancel admuinistratively any lease

that was invalid from its inception because it was issued in

violation of departmental regulations or statute. Boesche v.

Udall, 373 U.S. 472, 476-77, 83 S.Ct. 1373, 1375-1376, 10

2 Besides the lease applications submitted by plaintiff for the

lands at Ft. Chaffee, before the reguiatory amendment of 43 C.F.R.

§ 3101.2-1 it had also filed for noncompetitive leases on other

acquired lands on military reservations. Those lease applications were

not granted prior to the Secretary’s actions of November |, 1979, and,

as a result thereof, were rejected on November 30, 1979, as filed

before the effective date of the change in section 3101.2-1. Plainuff

has filed another action challenging the nullification of those lease

applications and the moratonum the Secretary has placed upon

further leases, in which a memorandum opinion and order is filed this

date. Texas Oil & Gas Corp. v. Andrus, 498 F.Supp. 677 (D.D.C.

1980. )

L.Ed.2d 491 (1963); Winkler v. Andrus, 614 F.2d 707, 711

(10th Cir. 1980). In Boesche, in ruling on the propriety of the

Secretary’s cancellation of a noncompetitive oil and gas lease

issued for certain public domain lands under the authority of

the Mineral Leasing Act of 1920, 30 U.S.C. § 226, the Court,

citing those statues giving the Secretary the general authority to

administer the public lands, 43 U.S.C. §§ 2, 1201, 1457, found

nothing in the Mineral Leasing Act that would in any way

abrogate the Secretary’s authority to cancel the leases adminis-

tratively because of their incipient invalidity. Boesche v. Udall,

supra, 373 U.S. at 476, 83 S.Ct. at 1375. While the Secretary’s

authority to grant leases for acquired lands comes from the

Mineral Leasing Act for Acquired Lands rather than the

Mineral Leasing Act that was involved in Boesche, it is appar-

ent that Congress, in granting the Secretary the authority to

issue mineral leases on acquired lands, bestowed that responsi-

bility “under the same conditions as [are] contained in the

leasing provisions of the Mineral Leasing Act.” H.R. Rep. No.

550, 80th Cong., Ist Sess. 2( 1947), reprinted in [1947] US.

Code Cong.Serv., pp. 1661, 1662. There being nothing in the

Mineral Leasing Act for Acquired Lands that in any way

deprives the Secretary of the authority to cancel leases issued in

violation of statute or regulation, under the proper circum-

stances the Secretary could exercise such power to invalidate oil

and gas leases, including plaintuff’s.

In exercising his authority to cancel the leases in this

instance, the Secretary, invcking the maxim that an agency

must follow its own reguiadons, see, e.g., Panhandle Eastern

Pipeline Co. v. FERC, 198 U.S.App. D.C. 387, 398 & n.84, 613

F.2d 1120, 1135 & n.84 (1979) (citing authorities), declared

plaintiff’s leases invalid because they were issued on the basis of

applications that should have been rejected under 43 C.F.R. §

2091.1(e) in that they sought leasehold interests in lands “not

... Subject ... to the operation of the public land laws.”3 The

propriety of this action depends entirely on the meaning of the

regulation’s language “subject . . . to the operation of the public

land laws” as it relates to the congressional action in 1976

removing the prior statutory restriction on the leasing of

military lands and the regulatory change in 1978 to reflect the

statutory amendment.

Despite plaintiff’s protestations to the contrary, it is appar-

ent that in amending the Mineral Leasing Act for Acquired

Lands in 1976, Congress gave the Secretary discretionary

authority, rather than a mandate, to allow military lands to be

leased for oil and gas production. The use of the term “may” in

the statute is dispositive of this point. See Burglin v. Morton,

527 F.2d 486, 488 (9th Cir.), cert. denied, 425 U.S. 973, 96

S.Ct. 2171, 48 L.Ed.2d 796 (1976). What is not so clear is

whether it was this statutory amezdment or the later regulatory

change in 43 C.F.R. § 3101.2-1(f) that “subjected” those lands

to the operation of the mineral leasing laws, within the meaning

of 43 C.F.R. § 2091.1(e). Examuning the 1976

[498 F.Supp. 676]

statute and its

legislative history, there is nothing to indicate that Congress

3 Although plaintiff has challenged the applicability of 43 C.F.R.

§ 2091.1 to situations involving acquired lands, this contention is

without merit. That section is a part of those regulatory provisions of

the Bureau of Land Management chat apply generally to land

resource Management without distinguishing between public domain

and acquired lands. 43 C.F.R. chap. II, subchap. B (1980). More-

over, in light of section 2091.1’s applicability to lease applications

filed under the Mineral Leasing Act, McTiernan v. Franklin, 508 F.2d

885, 887-88 & n. 3 (10th Cir. 1975), and the congressional mandate

that the Secretary’s rules and reguiations governing acquired lands

“shall be the same as those prescribed under the mineral leasing laws

to the extent that they are applicable,’ 30 U.S.C. § 359 (1976), the

Court finds no basis for holding that section 2091.1 is not relevant

here.

desired or compelled the acceptance of either interpretation.

Rather, the question was one of construction of the language of

section 2091.1(e).

[3-5] The judicial deference to which an agency’s inter-

pretation of its own regulation is afforded is great, such that if

several reasonable interpretations are available, the agency’s

construction need only be one of those, and not necessarily the

most reasonable of the alternative interpretations.* See, ¢.g.,

Expedient Services, Inc. v. Weaver, 614 F.2d 56, 57 n.1 (Sth

Cir. 1980); Belco Petroleum v. FERC, 191 U.S.App.D.C. 157,

163 n.5, 589 F.2d 680, 686 n.5 (1978). In considering the

language and purpose of the 1976 amendment and the regu-

lation, the Court can only conclude that the Secretary could

reasonably have given the regulations either of the inter-

pretations espoused by the parties here. That choice resided

with the department, and ultimately with Secretary Andrus as

head of the agency. As such, his decision to invalidate the

4 Despite certain substantive overtones, section 2091.1(e) basi-

cally is a procedural regulation in that it establishes certain criteria

that will govern whether an application should be considered by

Officials as properly lodged with the department. Although the

practical problems of accepting such applications are obvious,

nonetheless there appears to be nothing in the statutory scheme that

would prevent the department from considering lease applications for

lands not yet “open” to oil and gas exploration as properly filed

whenever received, the issuance of the leases being subject to the

availability of such lands under the laws governing mineral nights to

public lands.

leases was proper as based on a reasonable interpretation of his

own regulations which, in turn, required that the applications to

lease be rejected.5

Anticipating such a determination, plainuff puts forth two

other theories under which it contends that the Secretary’s

action in canceling the leases should be declared invalid. First,

Texas Oil & Gas argues that the Secretary should be estopped

from invalidating its leases because plaintiff could have “top-

filed” the lease applications after the August 1978 effective date

of the amended section 3101.2-1, thereby depriving the Secre-

tary of his legal justification for rescinding the leases, but did

not do so in reliance on the oral representations of certain BLM

Officials about the validity of the applications as filed.

[6,7] It is established that the doctrine of estoppel is to be

applied to the government only in the most extraordinary

circumstances and with the greatest care and circumspection.

See, e.g., L’Enfant Plaza Properties, Inc. v. District of Columbia

Redevelopment Land Agency, 184 U.S.App.D.C. 30, 39, 564

F.2d 515, 524 (1977); Hoeber v. District of Columbia Redevei-

opment Land Agency, 483 F.Supp. 1356, 1366 (D.D.C.1980).

This is especially so in instances relating to the public lands.

United States v. Eaton Shale Co., 433 F.Supp. 1256, 1272

5S Charging a violation of due process, plaintiff also asserts that

the Secretary’s order invalidating its leases should be overturned

because it was not afforded a hearing pnor to their cancellation.

Under the circumstances here, in which the Secretary invalidated

leases that were issued subject to cancellation for defects like that

strictly legal deficiency that was found to exist, the lack of a hearing

fails to violate due process under either the fifth amendment, see Gray

v. Johnson, 395 F.2d 533, 536-37 (10th Cir. 1966), cert. denied, 292

U.S. 906, 88 S.Ct. 2056, 20 L.Ed.2d 1364 (1968), or the Adminis-

trative Procedure Act, 5 U.S.C. §§ 553-554, see, e.g., Public Serv. Co.

v. FERC, 195 U.S.App.D.C. 130, 141, 600 F.2d 944, 955 (1979);

Independent Bankers Assoc. v. Board of Governors of the Federal

Reserve System, 170 U.S.App.D.C. 278, 292, 516 F.2d 1206. 1220

(1975); Citizens for Allegen County v. FPC, 134 U.S.App.D.C. 229,

232, 414 F.2d 1125, 1128 (1969).

(D.Colo.1977). The party asserting an estoppel must not only

establish that equitable principle’s traditional elements—false

representation, a purpose to invite action by the party to whom

the representation was made, ignorance of the true facts by that

party, and reasonable reliance—but must also make a showing

of an injustice to him and a lack of undue damage to the public

interest. Hoeber v. District of Columbia Redevelopment Land

Agency, supra, 483 F.Supp. at 1365-66.

[498 F.Supp. 677]

[8] In applying this analytic framework to the circum-

stances of this litigation, it is apparent that the doctrine of

estoppel is not appropriately invoked. Plaintff’s reliance upon

alleged telephone conversations with BLM officials can hardly

be called reasonable in light of the Interior Department’s

comments accompanying its proposal to amend section

3101.2-1, 42 Fed.Reg. 46558 (1977), which placed plaintiff on

notice of the possibility of a departmental interpretation of

section 3101.2-1 in line with that ultimately made by the

Secretary in November 1979. Cf. Udall v. Oelschiaeger, 389

F.2d 974, 977 (D.C.Cir.), cert. denied, 392 U.S. 909, 88 S.Ct.

2056, 20 L.Ed.2d 1367 (1968). Moreover, while there is

undoubtedly some injustice rendered plaintiff by the cancella-

tion of its leases, it cannot be said that the decision of the

Secretary is contrary or detrimental to the public interest in the

equitable leasing of the public lands. Estoppel simply will not

lie in this instance.

[9] Finally, relying on the seminal case of the United

States Court of Appeals for the Fifth Circuit in Pillsbury Co. v.

FTC, 354 F.2d 952 (Sth Cir. 1966), and authority from this

circuit, American Public Gas Association v. FPC, 186

U.S.App.D.C. 23, 567 F.2d 1016 (1977), cert. denied, 435 U.S.

907, 98 S.Ct. 1456, 55 L.Ed.2d 499 (1978); D.C. Federation of

Civic Associations v. Volpe, 148 U.S.App.D.C. 207, 459 F.2d

1231 (1971), cert. denied, 405 U.S. 1030, 92 S.Ct. 1290, 31

L.Ed.2d 489 (1972), plaintiff asserts that the Secretary’s action

should be reversed because it was improperly motivated by

pressure from members of Congress. Although the content of

the letters submitted to the Secretary by various Congressmen

and Senators and the implication arising from the timing and

subject matter of the subcommittee hearing in September 1979

can be termed “regrettable and quite inconsistent with that due

regard for the independence of the [Secretary] which Congress

and the courts must maintain,” American Public Gas Associ-

ation v. FPC, supra, 186 U.S.App.D.C. at 77, 567 F.2d at 1070,

nonetheless this evidence, when taken as a whole, is insufficient

to establish that the Secretary’s decision was improper as

rendered for political rather than policy reasons. See, Sun Oil

Co. v. United States, 572 F.2d 786, 812-13 (Ct.Cl1.1978);

American Public Gas Assocation v. FPC, supra, 186

U.S.App.D.C. at 77, 567 F.2d at 1070. Accordingly, the

Secretary’s order cancelling piaintiff’s leases must stand and

plaintuff’s requests for declaratory and injunctive relief are

denied.

Having concluded that the Secretary’s cancellation of

plaintiffs leases must stand, the question of the validity of

defendant’s action in denying plainuff a drilling permit for the

Ft. Chaffee lands need not be reached.

EXHIBIT 2

683 F.2d 427

TEXAS OIL AND GAS CORPORATION,

Appeilant,

James G. WATT, Secretary of the United

States Department of the Interior.

(Two cases)

Nos. 80-2297, 80-2302.

United States Court of Appeals,

District of Columbia Circuit.

Argued Nov. 2, 1981.

Decided june 11, 1982.

Lessee of oil and gas leases appealed from judgments of

the United States District Court for the District of Columbia,

498 F.Supp. 668 and 677, Joyce Hens Green, J., upholding

decisions of Secretary of the Interior cancelling oil and gas

leases issued to lessee for parcels of land on military property

and rejecting lessee’s outstanding lease applications for lands at

an Air Force base. The Court of Appeals, Mikva, Circuit

Judge, held that the actions by Secretary were contrary to law

and in excess of statutory authority where Congress had

removed the exclusion which prohibited any mineral leasing on

military lands from the Mineral Leasing Act for Acquired

Lands, and where Secretary premised his decisions on regu-

lations which required the rejection of applications if “for any

reason the land has not been made subject, or restored, to the

operation of the public land laws,” in that removal of the

military base exclusion “restored” or made such lands “subject”

to leasing, and thus the lands were put outside the regulatory

prohibition by the operation of law; thus, lessee’s leases on the

military property had to be reinstated, and lessee had to be

restored to its place at the head of the line for the leases on the

Air Force base.

Reversed.

Mines and Minerals —5.1(3, 7)

Actions by Secretary of Interior in cancelling lessee’s oil

and gas leases for parcels of land on military property and

rejecting lessee’s outstanding lease applications for lands at Air

Force base were contrary to law and in excess of statutory

authority where Congress had removed exclusion which prohib-

ited any mineral leasing on military lands from Mineral Leasing

Act for Acquired Lands and where Secretary premised his

dedision on regulation which required the rejection of appli-

cations if “for any reason the land has not been made subject,

or restored, to the operation of the public land laws,” in that

removal of military base exclusion “restored” or made such

lands “subject” to leasing, and thus put such lands outside

regulatory prohibition by the operation of law; thus, lessee’s

leases on military property had to be reinstated,

[683 F.2d 428]

and lessee had

to be restored to its place at head of line for leases on Air Force

base. Mineral Leasing Act for Acquired Lands, § 3(b) as

amended 30 U.S.C.A. § 352(b); 5 U.S.C.A. § 706.

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 appeilant.

Jerry Jackson, Atty., Dept. of Justice, Washington, D.C..,

with whom Jacques B. Gelin, Atty., Dept. of Justice, Washing-

ton, 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 Heifmch, Washington, D.C., and Rober

Roberts, III, Shreveport, La., were on the bref, for amicus

cunae, Arkia Exploration Co., urging affirmance in No.

80-2297.

Before ROBB and MIKVA, Circuit Judges, and LUM-

BARD, * 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 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 moratonum on oii

and gas leasing of all iands 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

Lease and the rejection of its applications, we reverse. The

issue concerning the leasing moratonum has become moot, so

we do not address it.

* Sitting by designation pursuant to 28 U.S.C. § 294(d).

I. BACKGROUND

The statutory scheme for leasing federal government lands

is somewhat complex. Congress first authorized mineral explo-

ration 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)) (“Min-

eral 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. Jd. § 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 noncompeti-

tively 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 Amend-

[683 F.2d 429]

ments 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 Amend-

ments, TXO, the appellant in this case, filed applications with

Interiors 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 amend-

ing § 3101.1 “would reflect the authority granted the Depart-

ment by section 12(a) of the Federal Coal Leasing Amend-

1 Prior to the 1976 Amendment, the statute read in pertinent part

as follows:

Except where lands have been acquired by the United States

for the development of the mineral deposits, by foreclosure or

otherwise for resale, or reported as surplus pursuant to the

provisions of the Surplus Property Act of 1944, all deposits of

coal, phosphate, oil, oil shale, gas, sodium, potassium, and sulfur

which are owned or may hereafter be acquired by the United

States and which are within the lands acquired by the United

States (exclusive of such deposits in such acquired lands as are

(a) situated within incorporated cities, towns and villages, na-

tional parks or monuments, (b) set apart for military or naval

purposes, cr (c) tidelands or submerged lands) may be leased by

the Secretary under the same conditions as contained in the

leasing provisions of the mineral leasing laws, subject to the

provisions hereof.

(Emphasis added.) The amendment merely deleted exception (b)

and redesignated exception (c) as exception (b).

ments Act of 1975 .... This regulation would increase the

amount of land available for oil and gas lea ing,” 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 nrohibition against the

leasing proposed here. The regulatory prohibition reflect-

ing 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

Septe.aber 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 com-

pleted, 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,? but

2 Eighteen applications were rejected because the lands covered

by them were found to be within a known geological structure and

therefore subject to leasing only on the basis of competitive bidding.

3 Initially the Malmstrom applications were rejected by an

Official in the Montana branch office of the BLM, on the ground that |

the Mineral Leasing Act for Acquired Lands excluded the lands

involved from leasing. See Appendix (App.) to No. 80-2302, at 40. |

TXO brought the 1976 Amendments to the attention of this official,

whereupon he vacated his earlier decision. See id. at 45. Next, the

commander of the Malmstrom Air Force Base, whose consent as the

official in charge of the surface of the original lands in question was

necessary before a lease could be granted, see 30 U.S.C. § 352

(1976), decided that national security considerations dictated that no

leasing should take place. TXO then persuaded the base commander

to reconsider his decision and consult with Department of Defense

Officials with regard to it. See App. to No. 80-2302, at 49. Meanwhile

the BLM held in abeyance its decision rejecting the applications

because of the commander’s lack of consent, pending a possible

different result after review by the Department of Defense. See id at

51-52. That still was the status of the Mailmstrom applications when

the Secretary endeavored to reject them on November |, 1979.

[683 F.2d 430]

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

4 Arkla next filed a suit in district court seeking to have the Fort

Chaffee leases declared invalid. Arkla Exploration Co. v. Andrus, Civ.

No. 79-2501 (D.D.C. filed September 21, 1979). Its suit was held in

abeyance pending the decision of the district court in the case before

us, and then it was dismissed without prejudice.

Arkla was granted leave to file a brief amicus curiae in the instant

case and to participate in oral argument. Arkla adopted the

Secretary’s arguments and urged in addition that the Fort Chaffee

leases were void ab initio because their issuance was the result of a

secret repeal of the pre-amendment Department of the Interior

regulations at 43 C.F.R. § 3101.2-1, in violation of the publication

requirements set forth in the Administrative Procedure Act, 5 U.S.C.

§ 552(b) (1976). We must reject Arkla’s argument, because our

holding with regard to the effect of the 1976 statutory amendment

means that it was possible for leasing to take place without a change

in the regulation at § 3101.2-1.

5 In In addition, Senator Wendell H. Ford called a hearing for

the express purpose of considering the Fort Chaffee leases. See Letter

to Secretary Andrus from Senator Ford, August 14, 1979, App. to No.

80-2297, at 94. The Interior Department officials designated by

Secretary Andrus to testify at the hearing all expressed the view that

the Fort Chaffee leases iad been issued in accordance with law. See

e.g., Oil and Gas Leasing of Lands Belonging to Fort Chaffee,

Arkansas: Hearings Before the Subcommittee on Energy Resources

and Materials Production of the Senate Committee on Energy and

Natural Resources, 96th Cong., |st Sess. 50-56 (1979) (Statement of

Donald P. Truesdell, Acting Asst. Director for Energy and Mineral

Resources, BLM, quoted in text, infra) (hereinafter cited as Fort

Chaffee Hearings).

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 |, 1979, id. at 106;

from Senators Long and Johnson, 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 com-

petitively 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 Geolog-

ical Structure]. Because the company was the first quali-

fied 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 accord-

ing to routine procedures of the noncompetitive leasing

system.

[683 F.2d 431]

6 The record indicates that TXO was itself not without some

congressional allies in this affair. See Letter to Secretary Andrus from

Representative Wright, Senator Bentsen, and Representative Frost,

September 28, 1979, App. to No. 80-2297, at 274.

af tn cam

Se a ee ee Te

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 memo-

randum to the Director of the U.S. Geological Survey, instruct-

ing 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 |, 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 |, 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 ail

acquired military and naval lands, pending a full reevaluation

of the noncompetitive leasing procedures. /d.

The status quo thus having been altered, the district court

determined that it could not grant a TRO, but that TXO could

amend its complaint to convert the suit into one for permanent

relief. TXO did so. The company also brought a separate suit

with respect to the rejection of the Maimstrom Air Force Base

applications and the general leasing moratorium.

In two memorandum opinions issued on September 25,

1980, Texas Oil & Gas Corp. v. Andrus, 498 F. Supp. 668

(D.D.C. 1980); id, at 677, the district court found for the

Secretary on his cross-motions for summary judgment. TXO

appealed from both decisions, and its appeals were consoli-

dated. For the reasons indicated below, we reverse in both

cases.

II. DISCUSSION

TXO maintained below and reiterates on this appeal that

the Secretary erred in thinking that his regulations required him

to cancel the Fort Chaffee leases and reject the Malmstrom

applications. The district court treated this issue of the

Secretary’s duty as hinging on an agency’s interpretation of its

own regulations. While the court was of the opinion that other

interpretations were plausible, it nevertheless decided that the

Secretary's interpretation was owed considerable deference and

should be accepted because it was reasonable.

We conclude that the district court’s approach led it to an

erroneous result. In view of the circumstances of this case, we

believe that the Secretary’s eleventh-hour interpretation of his

duty is owed no great degree of deference. Based on our

examination of the statutory language that is relevant to this

case, we have little trouble in concluding that the Secretary was

mistaken in believing that he was required to act as he did. His

actions merit reversal because they were contrary to law and in

excess of statutory authority under 5 U.S.C. § 706 (1976).

Consequently TXO’s Fort Chaffee leases were validly issued

and must be reinstated, and the company must be restored to its

place at the head of the line for the Mailstrom leases.

A. The Rationale for the Secretary’s Action

The Secretary premised his decision to cancel the Fort

Chaffee leases and to reject the pending Malmstrom appli-

cations on the imperative language of Section 2091.1 of the

Interior Department regulations, which requires the rejection of

applications if “for any reason the land has not been made

subject, or restored, to the operation of the public land laws.”

43 C.F.R. § 2091.1

{683 F.2d 432]

(1981). We think the Secretary’s reliance

on the language and meaning of the Departmental regulations

was misplaced. From the time of the amendment of the statute

by Congress until November 1, 1979, when the Secretary

cancelled TXO’s leases, the Department consistently and positi-

vely took the position that the military lands were open for

. leasing, in the Secretary’s discretion. This interpretation of the

law was expressed in rulings, letters, and instruction memo-

randa by department officials, including the Associate Solicitor

for Energy and Resources. See App. to No. 80-2297, at-58. As

mentioned, see Part I supra, the Secretary himself took that

position in a letter to Senator Bumpers. And on September 12,

1979, Donald P. Truesdell, BLM Acting Assistant Director for

Energy and Mineral Resources, testified before the Subcom-

mittee on Energy Resources and Materials, as follows:

In view of this change in the law. even though the

regulations had not been amended to reflect the change,

the Eastern States Office [of the BLM] would have had no

basis to reject the applications.

It is our view that the law itself was record notice to all

interested parties and ail had an opportunity to file. As has

been previously stated, over 800 applications have been

filed so far that we are aware of, by 25 to 30 companies.

They are still coming in. These figures cover military

reservations throughout the United States.

Fort Chaffee Hearings, supra note 5, at 52. Even if the

Department had not so construed the statutory situation, we

would be obliged to do so.

The prevention of the approval of lease applications turns

on our being able to find that the lands in question were not

“subject, or restored, to the operation of the public lands laws.”

Our examination of this key phrase can proceed without our

sharing the district court’s deference to the Secretary’s inter-

pretation. We are not dealing with the situation where an

agency’s construction of its own regulation normally will defeat

other plausible constructions, see, e.g., Belco Petroleum Co. v.

FERC, 589 F.2d 680, 686 n.5 (D.C. Cir. 1978). Instead, we

are considering the proper construction of a statute, because it is

necessary to interpret the 1976 Amendments in order to decide

what the regulation means.’ If the 1976 Amendment is inter-

pretéd to have subjected acquired military or naval lands to the

public lands laws, then we must reject the Secretary’s assertion

that only his discreuionary decision to open lands for leasing

accomplishes that result.

Clearly the 1976 Amendments that removed the military

base exclusion “restored” or made these lands “subject” to

leasing. They clearly were put outside the regulatory prohibi-

tion by the operation of law. The Secretary urges that this piain

meaning is thwarted by the impact of the explanatory material

accompanying his 1977 proposal to amend Section 3101.2-1 of

the regulations. The explanatory language purported to freeze

any leasing pending the rulemaking by “serving as an exercise

7 We proceed here from the awareness that “the courts are the

final authorities on issues of statutory construction,” Federai Election

Commission v. Democratic Senatorial Campaign Committee, 454 U.S.

27, 102 S.Ct. 38, 70 L.Ed.2d 23 (1981). We also are mindful that the

“thoroughness, validity and consistency of an agency’s re2soning are

factors that bear upon the amount of deference to be given an

agency’s ruling,” id. at 37, 102 S.Ct. at 44. Given the circumstances of

the case before us, however, we conclude that such factors suggesting

a deferential approach on our part are wholly absent. In particular,

with regard to the criterion of consistency we point out that the

Secretary’s decision contradicts his own earlier statements, see Letter

from Secretary Andrus to Senator Bumpers, Aug. 13, 1979, App. to

No. 80-2297, at 68, 68-69, quoted in text supra, Part [, and is

inconsistent with BLM practice from 1977 on.

of the Secretary’s new authority to lease or not to lease such

deposits.”” The Secretary exceeds his authority when he equates

his discretion with the impact of the statutory amendments of

1976.

In the 1976 Amendments, language excluding a category

of acquired lands from a

[683 F.2d 433]

statute allowing for leasing merely was

stricken out of the statute. This does not mean that the lands

must be leased, for that decision indisputably is in the Secre-

tary’s discretion. Nevertheless, the Secretary’s decision to

announce that certain lands are “available” cannot logically

constitute subjection of the lands to the operation of the statute.

The very existence of discretion—once absent with regard to

lands acquired for military or naval purposes, but now pres-

ent—is established by the statute and by the statute alone.

There is no relevance to the fact that the various details relating

to mineral leasing prescribed by statute come into play only if

and when the Secretary has decided to lease certain lands. The

alteration of the lands’ status, from one in which leasing is

prohibited to one in which it is allowed, has already been

brought about by statute.° That alteration clearly is the result

8 We note further that 30 U.S.C. § 226 (1976), headed “‘Lease

of oil and gas lands,” refers to the Secretary’s authority to lease ‘“{ a ]ll

lands subject to disposition under this chapter.” And the Secretary’s

own current regulation tracking this statutory provision with regard to

acquired lands employs language that is even easier to equate with the

phrase “made subject to the operation of the public land laws.” In 43

C.F.R. § 3101.2-1 (1981), “Availability of lands,” we encounter the

phrase “lands subject to disposition under the [Mineral Lands

Leasing} Act.”

of the “operation” of the 1976 Amendment on the lands in

question.?

We find it impossible, therefore, to agree with the Secre-

tary’s interpretation of his regulation at 43 C.F.R. § 2091.1(e).

To do so would require us to interpret the current section 352 of

the Mineral Leasing Act for Acquired Lands in a way that

defies common sense and the ordinary meaning of words.

When Congress speaks, its words become law at that time, not

when someone else repeats the message later on.

In addition, we note that an interpretation such as that

advanced by the Secretary, which would allow for statutory

amendments to become effective only after agency tracking

regulations have been changed to reflect the statute in its

current version, would work mischievous results that cannot

have been intended by Congress. Persons affected by statutes

implemented by agency discretion would not know where to

look to determine when and to what extent the status quo had

been altered. And we cannot allow an agency to ignore a

statutory amendment for a time and later claim, as here, that

regulations based on the unamended statute render void any

actions taken in accordance with the clear language of the

9 Indeed, it is not surprising that the Secretary himself has

described the effect of the 1976 Amendment in terms that accord with

our interpretation. In his memorandum to the Director of the BLM

instituting the moratonum on oil and gas leasing on acquired lands,

which was attached to the November 1, 1979, decision cancelling

TXO’s leases and rejecting its applications, the Secretary stated that

“{t}]hese lands were made subject to the Mineral Leasing Act for

Acquired Lands by section 12(a) of the Federal Coal Leasing

Amendments Act of 1976.” App. to No. 80-2297, at 142 (citations

omitted ).

amended statute.'0 An agency possessed of discretion may

exercise it or not; but it may not exercise it and then take back

its action on the ground that, based on the duty to adhere to its

own regulations irrespective of

[683 F.2d 434]

what the statute says, it lacked

the discretion in the first place.

It may be argued that the authority to reject—that is, to

refuse to accept for filing—premature applications necessarily

inheres in the authonty to decide which lands to lease. If

specific parcels of land have not yet been made available for

the granting of leases, then there may be no reason for the

Secretary to allow applications covering them to be filed.

Indeed, considerations of efficiency in the utilization of person-

nel and office space suggest that it would be in the interest of

the BLM not to allow filing of applications in advance of an

announcement that leasing will take place. Even if such

authonity is found to exist, however, it cannot serve as the basis

for the Secretary’s action in this case. Otherwise we would be

10 The explanatory material in the 1977 notice of proposed

rulemaking, quoted in Part I supra, does not alter this conclusion.

TXO’s applications were filed after the 1976 statutory amendment

and were processed after the new regulation at 43 C.F.R. 3101.2-1

became effective in September 1978. The notice could have been

viewed as an expression of Intenor Department policy prior to the

effective date of the new regulation, and perhaps therefore as a basis

for rejection of premature applications at the ume of filing. But the

notice itself was not a rule, and it referred only to /easing, with no

mention whatever of filing. The BLM’s action—or inaction—in

retaining TXO’s applications could certainly have been regarded by

the company as an indication that the applications were not pre-

maturely filed, thus rendering unnecessary a refiling after September

21, 1978. In any event, the record appears to indicate that the

company actually did approach the BLM for guidance on the refiling

quesuon, and was assured that refiling would not be necessary. See

Affidavit of Lin Patterson, TXO Assistant General Counsel, Jan. | 1,

1980, App. to No. 80-2297, at 75.

sanctioning a retroactive exercise of discretion to which it is

impossible to ascribe any rational purpose. It may weil be

prudent and efficient for the Secretary to refuse to accept

premature applications; but accepting them for filing and

processing them after September 21, 1978, when a regulation

opening lands for leasing went into effect, strips a /ater rejection

on prematurity grounds of all possible benefit to the BLM.

Moreover, the effort spent in processing the application is

entirely wasted; a net /oss in efficiency results.

B. Political Impropriery

TXO vigorously contends that the Secretary’s action was

the result of improper political pressure on the part of several

Senators. The district court termed the role of the Senators

“* ‘regrettable and quite inconsistent with that due regard for the

independence of the [Secretary] which Congress and the courts

must maintain,’ ” 498 F.Supp. at 677 (quoting American Public

Gas Association v. FPC, 567 F.2d 1016, 1070 (D.C.Cir.1977),

cert. denied, 435 U.S. 907, 98 S.Ct. 1456, 55 L.Ed.2d 499

(1978)). The court declined to conclude, however, that the

Secretary’s action was so improper that a reversal was required

on that ground alone. We need not decide for ourselves

whether the Secretary’s capitulation to political pressure would

require us to overturn his actions, because we have found a

separate ground for reversal. We note, however, that while the

frequent and forceful communications by several Senators

amounted to “pressure” in a general sense and indeed may be

regarded as “regrettable,” they did not contain anything like

the sort of threats that this court has suggested could serve as

evidence of improper motivation for an agency’s action. See

D.C. Federation of Civic Associations v. Volpe, 459 F.2d 1231,

1245—48 (1971), cert. denied, 405 U.S. 1030, 92 S.Ct. 1290, 31

L.Ed.2d 489 (1972).

C. The Moratorium

TXO challenges the Secretary’s general moratorium on

leasing of lands acquired for military or naval purposes, on the

theory that the action was not in conformity with the procedural

requirements of the Federal Land Policy and Management Act,

43 U.S.C. §§ 1701-1782 (1976). The district court concluded

that TXO, having lost on its challenge to the rejection of its

pending lease applications, no longer had any applications

pending and therefore lacked standing to challenge the imposi-

uon of the leasing moratorium. An intervening event moots this

issue. Effective August 10, 1981, the Department of the Interior

lifted the leasing moratorium with respect to lands for which no

applications had been filed prior to September 21, 1978, when

the new Department regulation tracking the 1976 statutory

amendment went into effect. See 46 Fed.Reg. 37,250 (July 20,

1981). As indicated in an Intenor Department memorandum

of June 5, 1981, filed with this court, the moratorium remains in

place with regard to lands covered by pre-September 21, 1978

applications, pending the outcome of this and any other

relevant litigation. At that time the moratorium will be lifted

from those lands as well, and noncompetitive leasing will

proceed, with priorities to be assigned in accordance with the

courts’ decisions. Consequently there is no longer any reason to

determine whether the moratorium was lawful in the first place.

[683 F.2d 435]

D. Remedy

The first consequence that flows from our decision is that

the Fort Chaffee leases must be reinstated. We have rejected

the Secretary’s proffered rationale for canceilation; the leases

were valid when issued. And there is no suggestion in this case

of the sort of conduct on the part of the lessee, such as default

on royalty payments, that would jusufy cancellation under 43

C.F.R. § 3108.3 (1981). Therefore the validity of the issued

leases continues undiminished. In addition, we see no reason

why TXO should not receive favorable action on its appli-

cations for drilling permits on two of the leased parcels at Fort

Chaffee, which have been held in abeyance since September 20,

1979.

With regard to the Malmstrom applications, which the

Secretary improperly rejected, they must have priority over

junior applications, if the Secretary proceeds with noncompeti-

tive leasing under the procedure dealing with “regular” appli-

cations. This conclusion plainly is required by statute and

regulation. The provision of the mineral leasing laws that

applies to the leasing of acquired lands states unequivocally

that where leasing is to take place, and the land is “not within

any known geological structure [KGS] of a producing oil or

gas field,” then “the person first making application for the

lease who is qualified to hold a lease under this chapter shall be

entitled to a lease.” 30 U.S.C. § 226(c) (1976). And the

current regulation dealing with the deter:nination of priorities

with regard to regular filing in the noncompetitive leasing

scheme tracks the statute, stating that “{njo lease shall be

issued before final action has been taken on any prior offer to

lease the land.” 43 C.F.R. § 3110.1-6(a) (1981). Because the

Malmstrom lands have not been found to be within a KGS, and

because there is no dispute with regard to whether TXO is a

“qualified” applicant as that term is used in the regulations at

43 C.F.R., Subpart 3102 (1981), final action on the company’s

applications will result in the issuance of leases.

The record in this case does not disclose whether there are

any applications for the Malmstrom lands that are junior to

those filed by TXO. To the extent that there may be such

applications that were filed after September 21, 1978, in

reliance on the Secretary’s 1977 notice of proposed rule-

making, they will not be accorded a priority because TXO has

the statutory priority as the applicant that was first to file.

III. CONCLUSION

This case very likely would not have arisen if the Secretary

had pursued a consistent policy of rejecting mineral lease

applications before there had been a public announcement that

particular parcels of land were available for leasing. And it

assuredly would not have arisen if the Secretary had not

engaged in a hasty attempt, based on politically suspect motives

at worst and on a legally erroneous theory at best, to undo what

had been done. As matters stand, TXO must have its twenty

Fort Chaffee leases, and it must be returned to its place at the

head of the queue for leases at Malmstrom Air Force Base.

The judgments appealed from are

Reversed.

EXHIBIT 3

FILED

OCT. 10, 1980

JAMES E. DAVEY, CLERK

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

ARKLA EXPLORATION COMPANY,

Plaintiff,

v. . Civil Action

No. 79-2501

Ceci, D. ANDRUS, Secretary

of the Interior,

Defendant.

ORDER

In consideration of the stipulation of the parties for an

indefinite stay of the proceedings in this matter pending final

appellate action in the case of Texas Oil & Gas Corp. v. Cecil

Andrus, Civil Action No. 79-2976, Stipulation Subject to Court

Approval, October 8, 1980, and in consideration of the uncer-

tainty of the timing of appellate review, the Court finds that it is

more appropriate, and it is this 10th day of October, 1980,

hereby

ORDERED, that the above-captioned cause is dismissed

without prejudice, and with all mnghts preserved to each party.

/S/ Joyce HENS GREEN

Joyce Hens Green

United States District Judge

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EXHIBIT 4

548 Federal Supplement 466

ARKLA EXPLORATION CO., et

al., Plaintiffs,

James G. WATT, Secretary of the United

States Department of the Interior, and

Texas Oil and Gas Corp., Defendants.

Civ. No. 82-2168.

United States District Court,

W. D. Arkansas,

Fort Smith Division.

Sept. 20, 1982.

Exploration company brought action challenging the

granting of oil company’s application for oil and gas leases on

military lands. On government’s motion to dismiss, the District

Court, H. Franklin Waters, Chief Judge, held that: (1) explo-

ration company and state had standing to seek district court’s

review; (2) the action was not barred by doctrine of collateral

estoppel; (3) action was not barred by doctrine of exhaustion

of administrative remedies; (4) action was not time barred; and

(5) district court would base its decision on the administrative

record, and the cause would not be tned de novo.

Order accordingly.

1. Federal Civil Procedure —103

Congress may enact statutes which create legal nghts, the

invasion of which creates standing, even though no injury

would exist without the statute.

2. Federal Civil Procedure —103

The true test of standing is whether parties seeking to

invoke court’s jurisdiction have alleged such a personal stake in

the outcome of the controversy as to assure that concrete

adverseness which sharpens the presentation of issues upon

which the court so largely depends for illumination of difficult

questions.

3. Federal Civil Procedure —103

Exploration company had standing to bring suit for equi-

table and declaratory relief protesting Secretary of Interior’s

issuance of oil and gas leases on military lands, since explo-

ration company asserted a right to bid competitively on tracts of

land which Secretary had reasonably classified and offered, and

evidence submitted showed a substantial likelihood existed that

exploration company had been harmed by the procedures

employed.

4. Federal Civil Procedure —103

District court will not lightly deny standing when there is

causal connection between claimed injury and challenged con-

duct; substantial likelihood exists that relief requested may

redress injury suffered; and there is such a palpable injury

present that millions of dollars may be affected by the actions

complained of.

5. Federal Civil Procedure —338

State had standing to intervene in suit challenging the

granting of oil company’s application for oil and gas leases on

military lands, since state would receive 50% of ail money

received from sales. bonuses, royalties and rentals of public

lands involved in the tigation, and if the military land at issue

was irrationally classified as non-KGS areas, the state would

lose one-half of all money which would have been received

from the rental of those lands.

[548 F.Supp. 467]

6. Mines and Minerals — 5.1(9)

Exploration company challenging the granting of oil com-

pany’s application for oil and gas leases on military lands, as

well as state in which such lands were located, had cause of

action to challenge the agency action, since exploration com-

pany qualified as aggrieved party adversely affected by the

challenged agency action, and state could attack allegedly

capricious determinations by agency affecting the state’s pay-

ments under Mineral Lands Leasing Act. Mineral Lands

Leasing Act, §35 as amended 30 U.S.C.A. § 191; Mineral

Leasing Act for Acquired Lands, § 6 as amended 30 U.S.C.A.

§ 355; Department of Energy Organization Act, § 2 et seq., 42

U.S.C.A. § 7101 et seq.; 5 U.S.C.A. §§ 702, 704; 28 U.S.C.A.

§ 1331. !

7. Judgment — 634

Exploration company’s claims challenging the granting of

oil company’s application for oil and gas leases on military

lands were not barred by doctrine of collateral estoppel, since

exploration company was neither a party to pnor litigation

involving the application nor in “privity” with a party, and

since exploration company raised new issues not litigated in the

previous proceedings.

8. Mines and Minerals — 5.1(9)

Doctrine of exhaustion of administrative remedies did not

preclude exploration company’s suit challenging the granting of

oul compzay’s application for oil and gas leases on military

lands, since exploration company had in fact pursued adminis-

trative remedies when required and available, and any further

administrative proceedings would be futile and of no benefit to

anyone.

9. Mines and Minerals — 5.1(9)

Exploration company’s suit challenging the granting of oil

company’s application for oil and gas leases on military lands

was not time barred, since exploration company was not

“adversely affected” by a final administrative decision until

Secretary’s issuance of leases was ordered reinstated, and

exploration company’s suit was filed within 90 days after

Secretary was ordered to reinstate the leases. Mineral Lands

Leasing Act, § 42 as amended 30 U.S.C.A. § 226-2.

10. Federal Civil Procedure — 338

School districts would not be permitted to intervene in

exploration company’s suit challenging the granting of oil

company’s application for oil and gas leases on military lands,

since school district’s claims were practically identical to those

of the state, which had been permitted to intervene, and the

addition of further parties to the action wouid delay and

complicate the prompt adjudication of parties’ respective inter-

ests.

11. Mines and Minerals — 5.1(9)

In exploration company’s suit challenging the granting of

oil company’s application for oil and gas leases on military

lands, district court would base its decision on administrative

record and the cause would not be tried de novo; however,

supplementary materials would he received to show the ade-

quacy or inadequcy of facts considered by Secretary of Interior,

to supply court with sufficient technical expertise to aid court in

understanding the complex issues involved, and to show the

true scope of record and procedures employed by Secretary in

reaching his decision.

Jim Guy Tucker, Mitchell, Williams & Selig, Little Rock,

Ark., Alan S. Novins, Lee Ellen Heifmch, Lobel, Novins &

pr ber etahawel

Lamont, Washington, D.C., Robert Roberts, III, Blanchard,

Walker, O’Quin & Roberts, Shreveport, La., for plaintiff, Arkla

Exploration Co.

Steve Clark, Atty. Gen. and Roger W. Giles, Asst. Atty.

Gen., Little Rock, Ark., for plaintiff-intervenor, State of Ark.

W. Asa Hutchinson, U.S. Atty., Fort Smith, Ark., Andrew

F. Walch, Patricia J. Beneke, Land and Natural Resources

Div., Washington, D.C., Mark K. Seifert, Energy and Re-

sources Division, Dept. of the Interior, Washington, D.C., for

defendant, James G. Watt.

Bradley D. Jesson, Robert T. Dawson, Hardin, Jesson &

Dawson, Fort Smith, Ark., Craig R. Carver, Gibson, Dunn &

[548 F.Supp. 468]

Crutcher, Denver, Colo.,

for defendant, Texas Oil and Gas Corp.

MEMORANDUM OPINION

H. FRANKLIN WATERS, District Judge.

I. Historical Background and Factual Summary

Congress first authorized mineral exploration and devel-

opment of government land in 1920, when it gave the Secretary

discretionary authority to open “public domain lands” to

leasing. 30 U.S.C. §§ 181-263. In 1947 Congress authorized

mineral leasing on lands “acquired” by the federal government

from private owners. 30 U.S.C. §§ 351-359. Under the 1947

Act, lands acquired by the United States and set apart for

military or naval purposes were excluded from leasing. 30

U.S.C. § 352.

Pursuant to the exclusion of military lands, Department of

the Interior regulations tracked the exclusion and prohibited

any mineral leasing on military lands. 43 C.F.R. § 3101.2-1(f).

In 1976 Congress removed the exclusion from the Statute, thus

making military lands subject to availability for leasing at the

Secretary’s discretion. 30 U.S.C. § 352 (Federal Coal Leasing

Amendments Act of 1975). The Department of the Interior

failed to contemporaneously alter its regulations which prohib-

ited mineral leasing.

In 1977, the Bureau of Land Management began the

process of changing its pre-1976 regulations. The Bureau

published a notice of proposed rulemaking in the Federal

the 1976 Amendments. See 42 Fed.Reg. 46,558 (1977). The

1977 Notice declared that the proposed rule would authorize

the Department of the Interior to lease lands acquired for

military or naval purposes, reflecting the authority granted by

the Federal Coal Leasing Amendments Act, increasing the

amount of land available for oil and gas leasing. The

“Supplementary Information” of the 1977 Notice declared that

the regulatory prohibition reflecting the old statutory provision

remained in effect, serving as an exercise of the Secretary’s

authority to lease or not to lease such lands. The regulatory

amendments became effective in September, 1978. See 43

Fed.Reg. 37,202 (1978).

In May of 1977, Texas Oil and Gas Corp. (TXO) filed

applications with the Bureau of Land Management for

noncompetitive oil and gas leases on lands at Fort Chaffee. It

was four months later that the Bureau began to change the pre-

1976 regulations.

Even though the 1977 Notice had frozen any leasing until

the rulemaking was completed, the Bureau proceeded to pro-

cess TXO’s applications.

In August of 1977, the Department of Energy Organization

Act, 42 U.S.C. § 7152, transferred the authonty to promulgate

reguiations under the Mineral Lands Leasing Act and the

Mineral Leasing Act for Acquired Lands from the Secretary of

the Interior to the Secretary of Energy, for the purpose of

fostering competition for federal leases. The Department of

Energy Organization Act requires the Secretary of the Intenor

to afford the Secretary of Energy at least thirty (30) days to

disapprove any term or condition which related to any matter

with respect to any matter within the new purview of the

Secretary of Energy.

On June 26, 1979, TXO’s applications, dated May 6, 1977,

were accepted by the Chief, Division of Lands and Minerals,

Bureau of Land Management, on behalf of the United States

and with the consent of the Corps of Engineers, and twenty

(20) leases were issued to TXO with an effective date of July 1,

1979.

Arkla filed a “protest” of the Se ~utary’s issuance of these

leases on September 17, 1979, and four days later filed suit in

the District Court for the District of Columbia and the Western

District of Arkansas. Subsequently, on September 20, 1979, the

Secretary directed the U.S. Geological Survey of the Bureau of

Land Management to re-evaluate its non-KGS classification of

the leased land. Consequently, TXO sought a temporary

restraining order on November |, 1979. The TRO hearing was

scheduled for November 2, 1979. On the evening of

[548 F.Supp. 469]

November

1, the Secretary issued a decision in which he cancelled the

twenty (20) Fort Chaffee leases and rejected all pending

applications that had been filed prior to September 21, 1978,

the effective date of the Department’s new regulations in

accordance with the 1976 amendment to the Mineral Leasing

Act for Acquired Lands, and further declared a moratorium on

the leasing of all acquired military lands pending full re-

evaluation of the leasing procedures.

Arkla’s “protest” was then dismissed as moot. TXO

subsequently amended its complaint to convert the suit to one

for permanent retief.

The District Court for the District of Columbia issued two

memorandum cpinions on September 25, 1980, Texas Oil and

Gas Corp. v. Andrus, 498 F.Supp. 668 (D.D.C. 1980), finding

for the Secretary on his cross-motions for summary judgment.

The decisions were consolidated for appeal.

The United States Court of Appeals for the District of

Columbia reversed\on June 11, 1982, holding that the Secre-

tary, in cancelling the leases, acted in excess of his authority.

The court reasoned that the 1976 Amendments made the lands

in question immediately subject to leasing, without any regu-

latory implementation being necessary.

On July 30, 1982, the District Court was mandated to issue

an order directing the Secretary of the Interior to reinstate the

leases.

On August 4, 1982, Arkla refiled the instant action raising

issues not considered by the District of Columbia courts,

seeking equitable and declaratory relief.

Subsequently, the government stipulated, with the approv-

al of TXO and ail parties, to take no action to change the status

of the matter until at least September 30, 1982.

Both the government and TXO moved to dismiss Arkla’s

complaint, raising issues of standing, unavailability of a private

cause of action, collateral estoppel, exhaustion, and statute of

limitations. The Court, after consideration of the bnefs sub-

mitted, orally advised the parties of the Court’s intention to

deny the motions to dismiss.

Subsequently, the State of Arkansas moved to intervene, as

well as Greenwood Schooi District No. 25, Lavaca School

District No. 3, Charleston School District No. 9, and Fort Smith

Special School District. On September 9, 1982, the Court orally

advised the parties that the State of Arkansas would be

permitted to intervene, but that the motions of the school

districts for intervention were to be denied.

The government aid TXO also moved to limit this Court’s

review to the administrative record. After reviewing the

arguments, the Court advised the parties that review would be

limited to the record, but that the record could be supplemented

as necessary to show the adequacy or inadequacy of the facts

considered by the Secretary as weil as the procedures utilized

by the Secretary in reaching his decisions, and to provide the

Court with sufficient technical expertise to allow the Court to

understand the complex factual issues presen-ed.

Pursuant to these rulings, the Court issues this Memo-

randum Opinion. The issues raised will be discussed in turn.

II. Discussion

A. Standing

The government and TXO assert that Arkla lacks standing

to seek this Court’s review, relying primarily upon Geosearch v.

An@rus, 508 F.Supp. 839 (D.Wyo.1981), and Pullman vy.

Chorney, 509 F.Supp. 162 (D.Colo.1981), among others.

In Geosearch, supra, the District Court of Wyoming found

standing lacking. In that case, the plainuff, Geosearch. was an

orgamizauon which actively searched for defects in the offer of

the first drawee of noa-GS tracts of land for oul and gas

leases. If their protest was successful, and if the lease was

reissued to the second drawee, Geosearch retained a percentage

in the lease. However, the first drawees had previously

assigned the leases to bona fide purchasers in several of the

situations presented. and in others had failed to umely tile a

“protest.”

[548 F.Supp. 470]

Standing was found lacking because:

In order to have standing, Geosearch must prove that it

has an injury in fact that is likely to be redressed by a

favorable decision of the court. Citizens Concerned For

Separation of Church and State v. City and County of

Denver, 628 F.2d 1289 (10th Cir. 1980); Duke Power Co.

v. Carolina Env. Study Group, Inc., 438 U.S. 59 [98 S.Ct.

2620, 57 L.Ed.2d 595] (1978). See also Data Processing

Service v. Camp, 397 U.S. 150 [90 S.Ct. 827, 25 L.Ed.2d

184] (1970). Even if Geosearch could demonstrate any

irregularities in the issuance of the leases to the first

drawees, and this Court does not so hold, the leases, if

cancelled, would not be reissued to Geosearch. Under the

regulations, the cancelled leases would be withdrawn,

offered at a competitive bid or subjected to a new simulta-

neous drawing. See 43 C.F.R. § 3112.1. Geosearch can-

not demonstrate any injury in fact and, therefore, has no

standing.

Id. at 845.

Thus, because the court was unable to award the relief

requested and because Geosearch claimed an abstract right to

the leases, standing was lacking.

In U.S. v. SCRAP, 412 U.S. 669, 93 S.Ct. 2405, 2417 n. 14,

37 L.Ed.2d 254, the Supreme Court heid that:

“Injury in fact” reflects the Statutory requirement that a

person be “adversely affected” or “aggrieved,” and it

serves to distinguish a person with a direct stake in the

outcome of a litigation—even though small—from a per-

son with a mere interest in the problem. We have allowed

important interests to be vindicated by plaintiffs with no

more at stake in the outcome of an action than a fraction of

a vote, see Baker v. Carr, 369 U.S. 186 [82 S.Ct. 691, 7

L.Ed.2d 663]; a $5 fine and costs, see McGowan v.

Maryland, 366 U.S. 420 [81 S.Ct. 1101, 6 L.Ed.2d 393];

and a $1.50 poll tax, Harper v. Virginia Bd. of Elections,

383 U.S. 663 [86 S.Ct. 1079, 16 L.Ed.2d 169]. While

these cases were not dealing specifically with § 10 of the

APA, we see no reason to adopt a more restrictive

interpretation of “adversely affected” or “aggrieved.” As

Professor Davis has put it: “The basic idea that comes out

in numerous cases is that an identifiable trifle is enough for

standing and the principle supplies the motivation.” Davis,

STANDING: TAXPAYERS AND OTHERS, 35 U. CHIL

L. REV. 601, 613. See also K. Davis, ADMINIS-

TRATIVE LAW TREATISE §§ 22.09-5, 22.09-6

(Supp.1970).

Thus, in SCRAP, the Supreme Court seemed to equate

“injury in fact” with “aggrieved” or “adversely affected.”

[1] The Court has recently refined its position, declaring in

Valley Forge v. Americans United, ——U.S.—~—,102 S.Ct. 152;—

70 L.Ed.2d 700 (1982):

Respondents also claim standing by reference to the

Administrative Procedure Act, 5 U.S.C. § 702 (1976),

which authorizes judicial review at the instance of any

person who has been “adversely affected or aggrieved by

agency action within the meaning of a relevant statute.”

Neither the (APA), nor any other congressional enact-

ment, can lower the threshold requirements of standing

under Art. III. See, e.g., Gladstone, Realtors v. Village of —

Bellwood, 441 U.S. [91] at 100 [99 S.Ct. 1601 at 1608, 60

L.Ed.2d 66]; Warth v. Seldin, 422 U.S. [490] at 501 [95

S.Ct. 2197 at 2206, 45 L.Ed.2d 343]. Respondents do not

allege that the Act creates a legal right, “the invasion of

which creates standing,” Linda R.S. v. Richard D., 410

U.S. [614] at 617 n. 3 [93 S.Ct. 1146 at 1148 n. 3, 35

L.Ed.2d 536] and there is no other basis for arguing that

its existence alters the rules of standing otherwise appli-

cable to this case.

It is clear that “Congress may enact statutes which create legal

rights, the invasion of which creates standing, even though no

injury would exist without the statute.” Linda R.S., supra.

[2] Regardless of the language used, the true test of

standing is whether the parties seeking to invoke the court’s

jurisdiction have alleged such a personal stake in the outcome

of the cqntroversy as to assure that concrete adverseness which

sharpens

[548 F.Supp. 471]

the presentation of issues upon which the court so

largely depends for illumination of difficult questions.

In Pullman v. Chorney, supra, the court was faced with a

challenge to allegedly fraudulently submitted multiple appli-

cations for oil or gas leases, which illegally reduced the

probability that the plaintiff's application would be drawn. The

court had little problem in concluding that plaintiff met the

requirement of “injury in fact”;

Although the plaintiff asserts his claim in various terms, the

basic interest to which he claims actual injury is the right to

have the drawing for leases under the SOG system be

conducted fairly. Clearly, by alleging that the private

defendants fraudulently submitted multiple applications,

which illegally reduced the probability that the plaintiff’s

application would be drawn, the piaintiff has in a sense

alleged that the interest he asserts has suffered actual injury,

(emphasis added )

Id. at 166.

Standing was denied because there was no causal

relationship between the injury and the court’s power to

remedy it.

Even assuming that the plainuff has alleged a “distinct and

palpable injury,” however, this Court cannot perceive that

the plainuff has established the requisite connection be-

tween the claimed injury and the challenged conduct, or,

as that requirement has also been stated, “that the exercise

of the Court’s remedial powers would redress the claimed

injuries.”

[3] Arkla’s asserted nght is the nght to bid competitively

on KGS tracts of land which the Secretary has reasonably

classified and offered. Correlatively, they assert the nghts to

have the lands not classified arbitrarily, to have the Secretary

utilize his discretion properly, and the nght to bid for all

properly categorized and offered KGS lands for potential profit

252 Lal Alsi AER TOD We aan D aN na Re Sa Tea Pree |

niet

ee ee ee ee etre eae

and exploratory public benefit. Further, Arkla seeks correction

of an alleged situation whereby they were practically defrauded

by the Bureau of Land Management into believing that the

Fort Chaffee lands were not available for lease. The leases

were shortly thereafter leased to TXO, despite Arkla’s long-

standing avid interest in the lands and continual contact with

the Bureau. Additionally, not only does Arkla contend that

their efforts to acquire the land were irrationally refused, but

that the Secretary acted in excess of his authority by violating

the Department of Energy Organization Act, 42 U.S.C. § 7152,

in failing to notify the Secretary of Energy at least thirty days

prior to the issuance of gas leases, in order to enable him to

exercise his responsibilities to promote competition for the

leases.

We think the evidence submitted shows a substantial

likelihood exists that Arkla has been harmed by the procedures

employed herein.

In Bryant v. Yellen, 447 U.S. 352, 100 S.Ct. 2232, 65

L.Ed.2d 184 (1980), the Supreme Court held that residents of

California’s Imperial Valley had standing to intervene on

appeal from an order that ruled against the government in an

action to declare that irmgation water could not be used for

landholdings in excess of 160 acres. The fact that the inter-

venors could not establish with certainty that they would be

able to purchase excess lands if their position prevailed did not

defeat standing since purchasers of the land would stand to

reap substantial windfall profits on resale. This ruling seems to

rest on the potential and likely benefit from a favorable

decision, with no more than a very attenuated notion of injury

in fact from the practices challenged.

If an “identifiably tnfling” interest in economic, aesthetic,

conservational and recreational benefits which is substantially

likely to be “injured” is sufficient, see, e.g., Sierra Club v.

Morton, 405 U.S. 727, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972),

and SCRAP, supra, then hypertechnical constructions couched

in eloquent phraseology should not be allowed to effectively

defeat a remedy when a wrong is apparent.

[4] Thus, while this Court recognizes the ingenuity of the

arguments advanced by TXO and the government on this issue,

the

[548 F.Supp. 472]

simple fact is that this Court will not lightly deny standing

when (1) there is a causal connection between the claimed

injury and the challenged conduct; (2) a substantial likelihood

exists that the relief requested may redress the injury suffered;

and (3) there is such a palpable injury present that millions of

dollars may be affected by the actions complained of. Under

these circumstances the Court would feel remiss in its duties in

proclaiming that the situation herein presented is abstract and

hypothetical. Very rarely will there be a more concrete, adverse

litigation “upon which the Court depends for resolution of

complicated issues.”

[5] The interest of the State of Arkansas in this matter is,

or should be, obvious. Pursuant to 30 U.S.C. §§ 191, 355, the

State of Arkansas will receive fifty per cent (50%) of all money

received from sales, bonuses, royalties, and rentals of the public

lands involved in this litigation. Clearly, if the Fort Chaffee

tracts are irrationally classified as non-KGS areas, the State will

lose one-half of all the money which would have been received

from the rental of these lands, which, instead, will accrue to the

benefit of whichever oil corporation is involved. Conversely, if

the tracts are KGS lands, the State of Arkansa$ stands to gain

tens of millions of dollars from a correct and adequate classifi-

cation procedure in accordance with law. This being so, in view

of the foregoing, we have no rational choice except to find that

the State of Arkansas has met the standing requirements in this

case.

fein WOK 5 LR RAN aa APE NEI ML 0 ON ON aes bee

While this Court has not the power to compel the Secretary

to offer the lands on a competitive basis, this Court may void

the present leases and require the Secretary to make a decision

which is well-reasoned and in accordance with law. Since it

appears that the policies behind the Mineral Leasing Act and its

amendments, the Department of Energy Organization Act, and

the history and policy of the Department of the Interior, clearly

favor the issuance of the leases competitively where exploration

interest is already present, we find that there is a substantial

likelihood that the correct resolution of this litigation will afford

the parties the relief sought.

B. Availability of a Cause of Action

[6] Having concluded that the State of Arkansas and

Arkla have standing to challenge the agency action involved,

the Court will discuss the necessity and availability of a cause of

action applicable to both plaintiffs.

It has been held, repeatedly, that District Courts have

jurisdiction to review final agency action of the Department of

the Interior, whether under 5 U.S.C. §§ 702, 704, or 28 U.S.C.

§ 1331. See generally Adams v. Witmer, 271 F.2d 29 ( 9th Cir.

1958); Coleman v. U.S., 363 F.2d 190 (9th Cir. 1966); Moseley

v. Hickel, 442 F.2d 1030 (9th Cir. 1971); Roberts v. Morton,

389 F.Supp. 87, aff’d, 549 F.2d 158 (10th Cir. 1977); Sheil Oil

Co. v. Kleppe, 426 F.Supp. 894 (D.Colo.1977); Andrus vy.

Charlestone Stone Products Co., 436 U.S. 604, 98 S.Ct. 2002, 56

L.Ed.2d 570.

Arkla, beyond an qualifies as an aggrieved party

adversely affected by the agency action challenged herein.

Further, even if such were not the case, 30 U.S.C. § 22-2, the

statute of limitations provision, clearly implies that judicial

review is to be allowed. And finally, 30 U.S.C. §§ 191, 355

seem to allow for such an implied right of action by any person

affected by the funding schemes.

30 U.S.C. § 191 provides:

All money received from sales, bonuses, royalties, and

rentals of the public lands . . . shall be paid into the

Treasury of the United States; 50 per centum thereof shall

be paid by the Secretary of the Treasury. . . to the State

. . . to be used by such State and its subdivisions, as the

legislature of the State may direct giving priority to those

subdivisions of the State socially or economically impacted

by development of minerals leased under this Act, for (i)

planning, (ii) construction and maintenance of public

facilities, and (iii) provision of public service: . . .

[548 F.Supp. 473]

Consicering the four factors listed in Cort v. Ash, 422 U.S.

66, at 78, 95 S.Ct. 2080, at 2087-88, 45 L.Ed.2d 26, in relation

to the entire statutory scheme presented here, it is clear that a

cause of action is available to enforce the payments due. This

implies that the State may attack allegedly capricious determi-

nations by the agency which affect the State’s payments greatly,

because, when considered as a whole, it is clear that the nght

asserted is within the zone of interests regulated by the entire

legislation.

In determining whether a private remedy is implicit in a

statute not expressly providing one, several factors. are

relevant. First, is the plaintiff “one of the class for whose

especial benefit the statute was enacted,” Texas & Pacific

R. Co. v. Rigsby, 241 U.S. 33, 39 [36 S.Ct. 482, 484, 60

L.Ed. 874] (1916) (emphasis supplied )—that is, does the

statute create a federal mght in favor of the plaintiff?

Second, is there any indication of legislative intent, explicit

or implicit, either to create such a remedy or to deny one?

See, e.g., National Railroad Passenger Corp. v. National

Assn. of Railroad Passengers, 414 U.S. 453, 458, 460 [94

S.Ct. 690, 693, 694, 38 L.Ed.2d 646] (1974) (Amtrak).

Third, is it consistent with the underlying purposes of the

legislative scheme to imply such a remedy for the plaintiff?

See, e.g., Amtrak, supra; Securities Investor Protection

Corp. v. Barbour, 421 U.S. 412, 423 [95 S.Ct. 1733, 1740,

44 L.Ed.2d 263] (1975); Calhoon v. Harvey, 379 U.S. 134

[85 S.Ct. 292, 13 L.Ed.2d 190] (1964). And finaih, is the

WRI Al ae ae le ek Deki we vi.

cause of action one traditionally relegated to state law, in

an area basically the concern of the States, so that it would

be inappropriate to infer a cause of action based solely on

federal law? See Wheeldin v. Wheeler, 373 U.S. 647, 652

[83 S.Ct. 1441, 1445, 10 L.Ed.2d 605] (1963); cf J. I.

Case Co. v. Borak, 377 U.S. 426, 434 [84S.Ct. 1555, 1560,

12 L.Ed.2d 423] (1964); Bivens v. Six Unknown Federal

Narcotics Agents, 403 U.S. 388, 394-395 [91 S.Ct. 1999,

2003-04, 29 L.Ed.2d 619]; id at 400 [91 S.Ct. at 2006]

(Harlan, J., concurring in judgment).

Cort v. Ash, supra.

Accordingly, the Court concludes that the instant action is

cognizable in the District Courts of the United States.

In short, Arkla may be heard in this matter as a matter of

administrative law of general applicability, and the State may

do so to protect its mghts granted by federal law.

C. Collateral Estoppel

[7] Both TXO and the government argue that Arkla is

collaterally estopped from litigating the issues presented be-

cause the validity of the leases issued noncompetitively to TXO

was litigated in the District Court for the District of Columbia

and an appeal in the Court of Appeals for the District of

Columbia Circuit (see Texas Oil and Gas Corp. v. Watt, 683

F.2d 427 (D.C. Cir.1982); Texas Oil and Gas Corp. v. Andrus,

498 F.Supp. 668 (D.D.C.1980).

Arkla was involved in that litigation, but as amicus curiae,

their motion for intervention having been denied.

In Oldham v. Pritchett, 599 F.2d 274, 278-279 (8th Cir.

1979), the Eighth Circuit Court of Appeals discussed the four-

pronged test for the applicability of the doctrine of collateral

estoppel, earlier approved in Gerrard v. Larsen, 517 F.2d 1127

(8th Cir. 1975). Said the Court:

As a branch of the doctrine of res judicata, collateral

estoppel serves both judicial and private interests in the

termination of litigation. In the context of the judicial

system, collateral estoppel principles serve primarily to

conserve time and resources; at the same time, the appli-

cation of collateral estoppel is a means by which a litigant

may evade unnecessary expenses and potential harassment

by lawsuit, and avoid conflicting nghts and duties arising

from inconsistent judgments. Johnson v. United States,

576 F.2d 606, 609- 10 (Sth Cir. 1978); Southwest Airlines

Co. v. Texas International Airlines, 546 F.2d 84, 94 (Sth

Cir. 1977); Bruszewski v. United States, 181 F.2d

[548 F.Supp. 474]

419, 421

(3d Cir. 1950), cert. denied, 340 U.S. 865, 71 S.Ct. 87, 95

L.Ed. 632 (1950).

Traditionally, courts have required “mutuality” be-

tween parties as a condition to the application of collateral

estoppel. 1B Moore’s Federal Practice 0.412[1] at

1803-04. The doctrine of “mutuality” requires ‘that “the

party invoking the judgment must similarly be bound to it

either as party or as 4 privy.” 1B Moore’s Federal Practice

{ 0.441[3] at 3781. The more recent trend, however, has

been to eiiminate strict “mutuality” as a condition to the

application of collateral estoppel. Montana v. United

States, [440] U.S. [147], 99 S.Ct. 970, 974, 59 L.Ed.2d

210 (1979); Cramer v. General Tel. & Electronics Corp.,

582 F.2d 259, 267-68 (3d Cir. 1978); Johnson v. United

States, 576 F.2d 606, 514 (Sth Cir. 1978); Speaker Sorta-

tion Systems, Division of A-—T—O, Inc. v. United States

Postal Service, 568 F.2d 46, 48—49 (7th Cir. 1978); accord,

Griffin v. Burns, 570 F.2d 1065, 1072 (Ist Cir. 1978);

Windham v. American Brands, Inc., 565 F.2d 59, 69 n. 30

(4th Cir. 1977); Clark v. Watchie, 513 F.2d 994, 998 n. 6

(9th Cir. 1975); see Blonder-Tongue Laboratories, Inc. v.

University of Illinois Foundation, 402 U.S. 313, 324-327, 91

S.Ct. 1434 [1440-1442], 28 L.Ed.2d 788 (1970); Restate-

ment (Second) Judgments, Appendix § 88, Comment b at

162-63 (Tent. Draft No. 3, 1976); see also Curne, Mutuail-

ity of Collateral Estoppel; Limits of the Bernhard Doctrine,

9 Stan.L.Rev. 981 (1957). This shift toward a more

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functional approach to the application of collateral estop-

pel has similarly resulted in the demise of the companion

rule to “mutuality,” the requirement of strict “adversity”

between parties. Scooper Dooper, Inc. v. Kraftco Corp.,

494 F.2d 840 at 845 (3rd Cir.) 1B Moore’s Federal

Practice, 90.411{2] at 1314. Since Justice Traynor’s

seminal opinion in Bernhard v. Bank of America Nat. Trust

& Savings Assn., 19 Cal.2d 807, 122 P.2d 892 (1942),

many jurisdictions permit nonparties to prior actions to rely

on the judgment as a defense to a subsequent action

brought by a party to the prior litigation. See Blander-

Tongue Laboratories, Inc. v. University of Illinois Founda-

tion, 402 U.S. 313, 91 S.Ct. 1434, 28 L.Ed.2d 788 (1970);

Note, Collateral Estoppel of Non-Parties, 87 Harv.L.Rev.

1485 (1974). If a stranger to the prior litigation may

invoke estoppel as a defense, then a fortiori a co-party in

the prior action ought to be able to preciude a former co-

party from relitigating issues finally adjudicated in the

prior lawsuit, Scooper Dooper, Inc. v. Kraftco Corp., 494

F.2d at 845.

In Gerrard v. Larsen, 517 F.2d 1127, 1131-32 (8th

Cir. 1975), this Court recognized the general erosion of

strict “mutuality” between parties as a requisite to the

application of collateral estoppel in its defensive context.

See Garrigan v. Giese, 553 F.2d 35, 36-37 n. 2 ( 8th Cir. ).

The Gerrard court, in discussing whether federal or state

law should be applied in determining the collateral estop-

pei effect of an issue adjudicated in a prior diversity action,

found it umnecessary to resolve the issue because the

defensive assertion of collateral estoppel could have been

accomplished under either body of law. /d. at 1132. The

Gerrard court proceeded on the basis that estoppel was

appropriate where: (1) the issue was identical to one in,a

prior adjudication; (2) there was a final judgment on the

ments; (3) the estopped party was a party or in privity

with a party to the pnor adjudication: and (4) the

estopped party was given a fuil and fair opportunity to be

heard on the adjudicated issue. Gerrard. v. Larsen, 517

F.2d at 1130; see Parklane Hosiery Co. v Shore, {43¢ US.

322] 99 S.Ct. [645] at 652 [58 L.Ed. 2d 552]; Pionder-

Tongue Laboratories, Inc. v. University of Illinois Founda-

tion, 402 U.S. at 328, 91 S.Ct. 1434 [at 1442]. We believe

that this analysis may appropnately be applied to the

circumstances of the present case. The Court’s adoption of

the Gerrard four-part test for the application of collateral

estoppel additionally forecloses the issue of whether the

Oldhams and Pmitchett were “adverse” as co-parties in the

proceeding.

[548 F.Supp. 475]

We agree with the reasoning of the Third

Circuit that “[{the! nullification of the mutuality requirement

renders non-adversity irrelevant to the doctrine of collateral

estoppel.” Scooper Dooper, Inc. v. Kraftco Corp., 494 F.2d at

845.

TXO argues that, inasmuch as all of the counts contained

in Arkla’s complaint relate to the general issue of the legal

validity of the Secretary’s decision to issue the leases, and since

that question has been decided by the District of Columbia

Court of Appeals, Arkla should not be able to relitigate the

question.

However, the Court of Appeals for the District of Colum-

bia Circuit held only that the Secretary’s own regulations did

not require him to carcel the leases. The Secretary had argued

that under 43 C.F.R. § 2091.1, the public land laws came into

effect only when he exercised his discretion whether to allow

leasing of certain lands. 43 C.F.R. § 2091.1 requires the

rejection of applications for leases if “for any reason the iand

has not been made subject, or restored, to the operation of the

public land laws.” Under then-existing regulations, his dis-

cretion to lease the lands required pnor published notice in the

Federal Register. The District of Columbia Court of Appeals

concluded that 30 U.S.C. § 352 (1976) (The Coal Leasing

Amendments Act of 1975) made the Fort Chaffee lands

immediately subject to the “operation of the public land laws”

without the necessity of regulations implementing the new

slegislation and without any announcement or notice as was

theretofore required.

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Clearly, as Arkla was neither a party to the pnor litigation

nor in “privity” with a party, and inasmuch as Arkla raises new

issues not litigated in the previous proceedings, the Gerrard test

forbids the application of the doctrine of collateral estoppel in

the instant action. Accordingly, Arkla’s claims are not barred.

D. Exhaustion of Administrative Remedies

[8] As noted, Arkla filed a “protest of the Secretary’s

issuance of these leases on September 17, 1979. On September

20, 1979, the Secretary directed the U.S. Geological Survey to

re-evaluate its classification of the leased land. On November

1, 1979, the Secretary cancelled the twenty leases and declared

a moratorium on the leasing of all acquired military lands.

43 C.F.R. § 4.21 sets forth General Rules Relating to

Procedures and Practice in the administrative bodies:

(a) Effect of decision pending appeal. Except as

otherwise provided by law or other pertinent regulation, a

decision will not be effective during the time in which a

person adversely affected may file a notice of appeal, and

the timely filing of a notice of appeal will suspend. the

effect of the decision appealed from pending the decision

on appeal. However, when the public interest requires, the

Director or an Appeals Board may provide that a decision

or any part of it shall be in full force and effect immedi-

ately.

(b) Exhaustion of administrative remedies. No deci-

sion which at the ume of its rendition is subject to appeal

to the Director or an Appeals Board shall be considered

final so as to be agency action subject to judicial review

under 5 U.S.C. § 704, unless it has been made effective

pending a decision on appeal in the manner provided in

paragraph (a) of this section.

We think it clear that, as the Secretary reversed his

issuance of the leases to TXO and Arkla’s appeal was subse-

quently dismissed as “moot,” Arkla has tmely-and diligently

pursued whatever administrative remedies that were available.

Since the Secretary is now subject to the direction of the

District of Columbia Court of Appeals to reinstate TXO’s

leases, it is clear that any further administrative appeal would

be futile, as the Secretary presently has no real choice as to

whi

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