Court Opinions

 

The Interior Board of Land Appeals, in its 2015 decision in Maralex Resources, Inc., 186 IBLA 34, held that BLM may inspect a well located on non-federal lands, for the purpose of determining whether production is being accurately recorded and reported for royalty computation purposes, when the lands are committed to a unit or communitization agreement with federal or Indian lands. The Board found that such a well, under 43 CFR 3161.1(b), is subject to the regulations “relating to site security, measurement, reporting of production and operations, and assessments or penalties for noncompliance with such requirements.” The Board’s decision was upheld in 2017 on judicial review by the U.S. District Court for the District of Colorado. On appeal to the U.S. Court of Appeals for the Tenth Circuit, however, on January 18, 2019, the decision was reversed – but on the very narrow ground that BLM’s enforcement authority did not extend to being able to require an operator or private surface owner to provide BLM with a key to the landowner’s locked gate at the drillsite or to allow BLM to place its own lock on the gate. (Except in that specific regard, the court reaffirmed that, while “BLM representatives may not independently enter [lease sites on privately-owned lands that are subject to a communitization agreement], but instead must seek entry . . . from the operating rights owner or operator,” the operating rights owner or operator “is obligated to allow such entry.”) Maralex Resources, Inc., v. Barnhardt, 913 F.3d 1189.

BLM, in the early 1980’s, issued a number of oil and gas leases on National Forest lands within the Badger-Two Medicine area in Montana, in accordance with the results of the required environmental and historic-preservation reviews that had been conducted for those lands by BLM and the Forest Service.  After further environmental review, applications for permit to drill were approved on some of the leased lands.  In 1993, however, BLM, in the face of environmental and Tribal concerns that had been raised, suspended the leases to allow for additional review; and the suspensions remained in place thereafter.  Ultimately, in 2016 and early 2017, the leases were canceled by BLM altogether, on the ground that they had been improperly issued because the pre-leasing environmental and historic-preservation reviews had been deficient.  BLM’s position, as in many other cases where it has cancelled leases long after issuance on the basis of some asserted procedural deficiency occurring before the leases were issued, was that administrative cancellation in such situations was authorized under the 1963 decision of the U.S. Supreme Court in Boesche v. Udall.  Most of the Badger-Two Medicine lessees accepted the cancellations; but two of them brought suit.  In Solenex LLC v. Jewell, and Moncrief v. U.S. Department of Interior, the U.S. District Court for the District of Columbia, on September 24, 2018, ruled in favor of the two lessees.  The court declined to determine whether BLM’s cancellation authority, under the Boesche case, was as unlimited as BLM claimed, finding that, even if such authority existed, its exercise in this case was arbitrary and capricious: “Regardless of the lawfulness of the lease’s issuance thirty years ago, the agency’s rescission of the lease must still comply with the [Administrative Procedure Act].”  The court explained (with emphasis in the original), “The reasonableness of an agency’s decision to rescind a lease must be judged in light of the time that has elapsed and the resulting reliance interests at stake. . . . Federal defendants appear to argue that no time-period, however long, would prove too attenuated to reconsider the issuance of a lease under newly discovered legal theories. . . . Horsefeathers!”  Appeals of these decisions to the U.S. Court of Appeals for the District of Columbia Circuit are pending.