RICHARD J. LEON, United States District Judge.
Plaintiff W.A. Moncrief, Jr. ("Moncrief"), the holder of a federal oil and gas lease in Montana, brings suit against the United States Department of Interior ("Interior") and the Director of the Montana Bureau of Land Management ("BLM") (collectively, "federal defendants" or "the Government") relating to the Government's cancellation of his lease after suspending all oil and gas drilling and extraction activity on that lease for more than thirty years. See Compl. [Dkt. # 1] ¶¶ 9-11, 48-59. Plaintiff seeks declaratory and injunctive relief, including that this Court vacate the cancellation and reinstate the lease, based on federal defendants' alleged violations of the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 et seq. See Compl. ¶¶ 60-86. Before this Court are the parties' Cross-Motions for Summary Judgment. See Pl.'s Motion for Summary Judgment [Dkt. # 19] ("Pl.'s Mot."); Defs.' Cross-Motion for Summary Judgment [Dkt. # 21] ("Defs.' Mot."); Df.-Intervenor's Cross-Motion for Summary Judgment [Dkt. # 24] ("Df-Intervenor's Mot."). For the following reasons, the plaintiff's motion for summary judgment [Dkt. # 19] is GRANTED and defendants' motions [Dkt. ## 21, 24] are DENIED.
The W.A. Moncrief ("Moncrief") lease is one of several leases located in the Badger-Two Medicine ("Badger-Two") area in the Lewis and Clark National Forest in northwestern Montana.
The Forest Service issued Federal Lease No. 53320 to Randall L. Weeks ("Weeks") on June 1, 1982. See Issuance of Lease, J.A. Vol. I [Dkt. # 31-1] at 69-80 (BLM-M000764-774). Weeks subsequently sold the lease to Atlantic Richfield Corporation ("ARCO") in December 1983 for $1.3 million. See 1/13/84 Lease Assignment, J.A. Vol. I at 49 (BLM-M000687). In May 1988, ARCO requested a suspension of the lease while BLM was considering applications for permits to drill ("APD") on other leases in the Badger-Two area, including the leases owned by Fina Oil (subsequently acquired by Solenex LLP) and Chevron, see 6/1/88 DOI Letter to ARCO, J.A. Vol. I at 68 (BLM-M000746), intending that suspension to "terminate upon completion of the Environmental Impact Statement for [the] pending application[s] ... at which time the BLM and Forest Service would consider other drilling proposals." Id. It was with the understanding that this was a "temporary suspension" that W.A. "Monty" Moncrief purchased the lease for "substantial consideration" on March 1, 1989. See 6/1/82 Lease Assignment, J.A. Vol. I at 66-67 (BLM-M000740-741); see also Decl. of C.B. Moncrief ("Moncrief Decl.") [Dkt. # 19-2] ¶ 3.
The Forest Service and BLM prepared a joint Environmental Impact Statement ("EIS") and approved the Fina and Chevron APDs in 1991. See Forest Service ROD, J.A. Vol. I at 106-07 (FS002148-2149). The BLM and Forest Service later withdrew approval to seek further review of traditional practices in the Badger-Two area, but then approved the Fina and Chevron APDs again in 1993. See 1/15/93 BLM Letter to Fina Approving APD with Conditions, J.A. Vol. I at 108 (FS002207). Yet even though the Chevron and Solenex APDs had been approved, BLM continued to suspend leases in the Badger-Two Medicine area from 1993-1998, including the Moncrief lease. See generally Defs.' Mot. at 7-9; Pl.'s Mot. at 12.
Curiously, the Forest Service did not make a determination of adverse effects
In late 2016, a Moncrief employee received a phone call informing it that its lease would likely be cancelled as well. See Defs.' Answer ¶ 56; Email Messages, J.A. Vol. 1 at 32 (BLM-M000665). Moncrief's attorneys sent a letter to Interior on November 23, 2016, requesting that the lease not be cancelled and also requesting a hearing. See 11/23/16 WPD&N Letter, J.A. Vol. 1 at 84-85 (BLM-M000801-802). Interior never responded to Moncrief's request for a hearing, but sent a letter decision administratively cancelling the Moncrief Lease on January 6, 2017, in the waning days of the Obama administration. See 1/6/17 Letter to Moncrief, J.A. Vol. 1 at 36-48 (BLM-M000670-682). Interior concurrently published a press release on January 6, 2017 noting that all leases in the Badger-Two area were being terminated. See 1/6/17 Press Release, J.A. Vol. 1 at 83 (BLM-M00800). Moncrief filed suit against Interior and BLM in this court on April 5, 2017. Thus, I now must review the lawfulness of federal defendants' cancellation of the Moncrief lease.
Plaintiff Moncrief argues that the agency's authority to administratively cancel a lease is limited under the Mineral Leasing Act of 1920 ("MLA"). 30 U.S.C. §§ 181-287. The MLA governs the Secretary of Interior's (hereinafter "the Secretary") authority to issue leases for "[a]ll lands subject to disposition under this Act which are known or believed to contain oil or gas deposits." Id. § 226(a). Pursuant to the MLA, the Secretary may also cancel those leases if the lease is (1) "in violation of the MLA, unless the current leaseholder is a bona fide purchaser," id. §§ 184(h)(1), (h)(2); (2) "when a lessee has violated the statute, regulations, or the lease itself, id. § 188(a); or (3) "where the lessee is in violation of lease provisions after at least 30-days' notice" and the lease is a nonproducing lease, id. § 188(b). The Department of Interior has also promulgated its own regulations governing the cancellation of leases. See 43 C.F.R. § 3108.5. Namely, the Secretary can cancel leases for either (1) the lessee's failure "to comply with any of the provisions of the law, the regulations issued thereunder, or the lease" after notice and 30 days to cure, 43 C.F.R. § 3108.3(a), or (2) the agency's determination that the lease was "improperly issued." Id. § 3108.3(d).
As asserted by federal defendants, one of the ways in which the lease could be "improperly issued" is by non-compliance with the National Environmental Policy Act ("NEPA") and the National Historic Preservation Act ("NHPA"). Defs.' Mot. at 13. NEPA requires that agencies take a "hard look" at the environmental consequences, Robertson v. Methow Valley Citizens Council. 490 U.S. 332, 350, 109 S.Ct. 1835, 104 L.Ed.2d 351 (1989), of "major Federal actions" that "significantly affect[] the quality of the human environment." 42 U.S.C. § 4332(C);
Federal defendants also allege that the lease at issue was in violation of the National Historic Preservation Act ("NHPA"). Defs.' Mot. at 14. NHPA requires that the agency "take into account the effect of [an] undertaking on any historic property." 54 U.S.C. §§ 300308, 306108. This requires that the agency consult with the Advisory Council of Historic Preservation and seek its comments. See id. NHPA consultation is usually considered adequate where the acting agency has "visited the site [and] consulted with the preservation authorities" before concluding there will be no adverse impact on the historic property. Duncan's Point Lot Owners Ass'n Inc. v. F.E.R.C., 522 F.3d 371, 377 (D.C. Cir. 2008); see also Nat'l Parks Conservation Ass'n v. United States ("NPCA"), 177 F.Supp.3d 1 (D.D.C. 2016) (permitting mineral development in a designated NHPA historic district after the Forest Service conducted an environmental assessment but not a full-blown environmental impact statement). But, importantly here, neither NEPA nor NHPA dictates a substantive outcome. See, e.g., Sierra Club v. Federal Energy Regulatory Commission, 867 F.3d 1357, 1367 (D.C. Cir. 2017) ("NEPA directs agencies only to look hard at the environmental effects of their decisions, and not to take one type of action or another.") (internal quotation marks omitted); id. ("[NEPA] is primarily information-forcing"); Delaware Riverkeeper Network v. F.E.R.C., 753 F.3d 1304, 1310 (D.C. Cir. 2014) ("NEPA is `essentially procedural' and designed to ensure `fully informed and well-considered decision[s]' by federal agencies) (quoting Vt. Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 558, 98 S.Ct. 1197, 55 L.Ed.2d 460 (1978)); Nat'l Mining Ass'n v. Fowler, 324 F.3d 752, 755 (D.C. Cir. 2003) ("An essentially procedural statute, [NHPA] imposes no substantive standards on agencies, but it does require them to solicit the Council's comments and to take into account the effect of their undertakings.") (internal citation omitted).
Any agency action can be set aside under the APA where it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). As articulated by the Supreme Court, "[t]he scope of review under the `arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co. ("State Farm"), 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). Nevertheless, even an action that is within the agency's statutory authority may still be arbitrary and capricious if the agency fails to exhibit reasoned decision-making. See Encino Motorcars, LLC v. Navarro, ___ U.S. ___, 136 S.Ct. 2117, 2126, 195 L.Ed.2d 382 (2016) ("Unexplained inconsistency' in agency policy is `a reason for holding an interpretation to be an arbitrary and capricious change from agency practice...'"); Am. Wild Horse Pres. Campaign v. Perdue, 873 F.3d 914, 923 (D.C. Cir. 2017) ("A central principle of
Under Federal Rule of Civil Procedure 56(a), summary judgment shall be granted to the moving party "if the movant shows that there is no genuine dispute as to any material fact." Fed. R. Civ. P. 56(a). Because this case challenges a final agency action under the APA — the cancellation of plaintiff's lease — to determine whether summary judgment is warranted I must determine "whether the agency acted within the scope of its legal authority, ... explained its decision, ... relied [on facts that] have some basis in the record, and... considered the relevant factors." Fund for Animals v. Babbitt, 903 F.Supp. 96, 105 (D.D.C. 1995). Here, I consider whether the Department of Interior and Bureau of Land Management, through the Secretary, acted reasonably in cancelling the Moncrief lease after more than thirty years for an alleged pre-lease error.
As a preliminary matter, the parties disagree as to whether or not the MLA grants federal defendants either expansive or limited authority to administratively cancel leases for pre-lease errors. Defendants and defendant-intervenors argue that the Secretary has the inherent statutory authority to administratively cancel leases. Defs.'s Mot. at 14. Defendants point to 43 U.S.C. § 2, which authorizes the Secretary to "perform ... all executive duties ... in anywise respecting... public lands," including to "correct [an] error []" of her predecessor. Boesche v. Udall, 373 U.S. 472, 478, 83 S.Ct. 1373, 10 L.Ed.2d 491 (1963).
The Supreme Court in Boesche upheld the Secretary's cancellation of a lease that was "defective because it failed to include an adjoining 40-acre tract under application by another party." Id. at 484, 83 S.Ct. 1373. Reviewing the legislative history of the MLA, the Court observed that "[i]t would thus be surprising to find in the Act, which was intended to expand, not contract, the Secretary's control over the mineral lands of the United States, a restriction on the Secretary's power to cancel leases issued through administrative error — a power which was then already firmly established." Id. at 481, 83 S.Ct. 1373. As such, federal defendants read into Boesche the Supreme Court's blessing to the Secretary's broad lease-cancellation authority, at lease for pre-lease errors.
Plaintiff Moncrief, on the other hand, would limit Boesche, 373 U.S. at 485, 83 S.Ct. 1373, to its facts, pointing to the Supreme Court's language at the end of the opinion:
Id. Moncrief argues that the Secretary's administrative cancellation authority is limited, not absolute, and is restricted by Congress to "only three circumstances":
Pl.'s Mot. at 3.
Not surprisingly, this dispute over the scope of the Secretary's authority to cancel leases through the administrative, rather than judicial, process, is not limited to the circumstances of this case and has never been squarely resolved by our Circuit.
But thankfully, I need not resolve such a broad-sweeping question here because this case can be resolved on other grounds. For purposes of my analysis, I will assume that the Secretary does in fact have the statutory authority to administratively cancel leases under the circumstances presented in this case. Yet, even assuming that authority, the Secretary's action cannot be "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A); Rempfer v. Sharfstein, 583 F.3d 860, 865 (D.C. Cir. 2009) (courts must determine "whether the agency acted arbitrarily or capriciously"). Unfortunately for the defendants it was here.
An agency action is "arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, [or] offered an explanation for its decision that runs counter to the evidence before the agency." State Farm, 463 U.S. at 43, 103 S.Ct. 2856. "The scope of review under the
In Watt, our Circuit Court reversed the district court's approval of the Secretary's decision to cancel leases issued on military lands, reasoning that the cancellation was arbitrary and capricious. Id. The court ruled that the Secretary could not rescind the leases based on newly-discovered violations of a later-in-time law passed by Congress. Id. While the issue in Watt was the Secretary's mistaken belief that he was required to cancel for pre-lease errors, rather than permitted to do so as defendants argue here, the circumstances are similar insofar as the court refused to sanction "a retroactive exercise of discretion to which it is impossible to ascribe any rational purpose." Id. at 434. In particular, our Circuit Court emphasized the reliance interests at stake, observing that:
Id. at 433-34.
Similarly here, federal defendants' exercise of authority to cancel Moncrief's lease for pre-lease errors was arbitrary and capricious because of the failure to consider the substantial reliance interests at play. For nearly a decade, Moncrief, along with other leaseholders, received letters from the Secretary suspending their leases under the understanding that Interior was considering the area for wilderness designation. See, e.g., Letters Suspending Moncrief Lease, J.A. Vol. I at 51-65 (BLM-M000717-737). They received no notice of any supposed violation. It was not until 2002 that Interior began consultation with the Blackfeet Nation under Section 106 of the NHPA. See 1/31/02 Determination of TCD Eligibility Notification, J.A. Vol. IV at 201 (FS005942). Even then, leaseholders received no notice that their leases might be subject to cancellation. Defendants cannot hide behind the consultation process as a fair notice to leaseholders that something might be amiss with their leases. The agency's own delinquency in reaching a resolution does not diminish the reliance interests of leaseholders who had been waiting on that resolution for more than thirty years. Thus, I find that federal defendants' failure to consider those interests was arbitrary and capricious in violation of the APA. 5 U.S.C. § 706(2)(A).
The arbitrary cancellation of Moncrief's lease, without notice, also violates his rights a bona fide purchaser under the MLA, 30 U.S.C. § 184(h)(2); 43 C.F.R. § 3108.4, because Plaintiff Moncrief "[1] acquired his interest in good faith, [2] for valuable consideration, and [3] without notice of the [alleged] violation," Sw. Petroleum Corp. v. Udall, 361 F.2d 650, 656 (10th Cir. 1966).
Defendants claim that only a violation of the MLA itself, not violations of NEPA. NHPA, or other statutes, warrants bona fide purchaser protection. Defs.' Mot. at 20. But that argument is entirely circular! Defendants cannot at once argue that a violation of NEPA and NHPA renders a lease "subject to cancellation" under its regulations, see 43 C.F.R. § 3108.3(d), and
Plaintiff Moncrief easily qualifies for bona fide purchaser status because he tendered valuable consideration to his predecessor-in-interest, ARCO. See Moncrief Decl. [Dkt. # 19-2] ¶ 2. There is no evidence that he did not acquire his interest in good faith. And as for notice, notice of continued suspensions while an EIS was conducted on APDs on other leases is hardly notice that his lease was void for the reasons already outlined above. Indeed, Moncrief's predecessor, ARCO, requested the suspension on the understanding that it would "terminate upon completion of the Environmental Impact Statement for [the] pending application[s]." see 6/1/88 DOI Letter to ARCO, J.A. Vol. I at 68 (BLM-M000746); Pl.'s Mot. at 11. And the suggestion of voidness is further rebutted by Interior's failure to cancel the lease to remedy the supposed violation for more than thirty years.
Because I find a violation of the APA on the grounds above, I need not reach Moncrief's additional arguments that the Secretary's cancellation violated his due process rights and was time barred by the statute of limitations.
For the reasons outlined above, I find that federal defendants' decision to cancel the Moncrief lease was arbitrary and capricious. Thus, for all of the reasons outlined in this Opinion, plaintiff's Motion for Summary Judgment [Dkt. # 19] is GRANTED, defendants' Cross-Motion for Summary Judgment [Dkt. # 21] and defendant-intervenor's Cross-Motion for Summary Judgment [Dkt. # 24] are DENIED, and this case is remanded to the Department of Interior with the order that the Moncrief lease be REINSTATED.
