bonus-sliding scale royalty system, and will experiment with the cash bonus-fixed net profit share system in the September 1980 sale. Therefore, defendants deny that the absence of regulations for all bidding systems authorized by the OCS Act violates the statute and precludes the continuation of lease sales.
It is the opinion of this Court that there does exist a genuine issue as to whether the statute requires the Secretary to fully promulgate regulations for all bidding systems before leasing activity on the outer continental shelf can take place. Certainly, this is a material fact in dispute which precludes the grant of plaintiffs' motion for partial summary judgment. Accordingly, the motion for partial summary judgment will be denied.
IV. The Motion for Preliminary Injunction
Plaintiffs seek, in the alternative, a preliminary injunction enjoining the September 1980 lease sales. Preliminary injunctive relief is an extraordinary equitable remedy. The law is well settled that the moving party has the burden of demonstrating that (1) he will suffer immediate irreparable injury if the relief is not granted; (2) he has a strong likelihood of succeeding on the merits; (3) a balancing of the equities and maintenance of the status quo favor relief and (4) the public interest will be favored by the grant of such relief. Virginia Petroleum Jobbers v. Federal Power Commission, 110 U.S.App.D.C. 339, 259 F.2d 921 (D.C.Cir.1958). The elements will be discussed seriatim.
The plaintiffs contend that they will be irreparably harmed if the Court fails to enjoin the defendants from proceeding with the lease sales scheduled for September 1980 absent the full promulgation of regulations for and implementation of all the alternative bidding systems. At the heart of this injury, plaintiffs allege, is the cash bonus-fixed royalty system which, as employed by defendants in the past, will cause damage to plaintiffs for it fails to promote proper competition and expeditious development of off-shore energy reserves. To support their arguments, plaintiffs refer to reports submitted in relation to past lease sales. These reports discuss how the cash bonus-fixed royalty bidding system operates and conclude that the system depresses production and competition as well as reduces fair return to the federal treasury. The plaintiffs also rely on reports and statistical data to support their contention that use of the cash bonus-fixed royalty system is designed to discourage the small bidder thereby decreasing competition and ultimately causing injury. Plaintiffs principally rely on the testimony of their expert, George Donkin, whose affidavit states that every sale in which the cash bonus system with a fixed-royalty at one-sixth (1/6) was used, produced a diminishing return to the federal government.
Plaintiffs expound on the negative aspects of the cash bonus-fixed royalty system but fail to demonstrate exactly how they are injured by the failure of defendants to promulgate all the regulations. Plaintiffs focus only on how the cash bonus-fixed royalty system is the least favorable system to the public interest and why regulations for and implementation of the variable profit share system will be most favorable.
Injunctions should not issue unless the threat of injury is imminent and well-founded and the injury itself would be incapable of being redressed after a final hearing on the merits. The Court finds that plaintiffs have failed to demonstrate the requisite irreparable injury to them in relation to the scheduled September 1980 sale. The cash bonus system with fixed royalty is not the exclusive method by which leases are being offered for sale. Moreover, the use of this system is consistent with the intent of Congress to experiment in order to obtain valid data for comparison with the performance of other systems.
Likelihood of Success
Upon consideration of a motion for preliminary injunction, the Court need only consider the likelihood of success on the merits, for adjudication of the merits must await a full hearing. In the instant motion, plaintiffs maintain that the ultimate question for resolution is whether the Department of Interior can continue in the third year after the new statute with exclusive use of cash bonus bidding and even refuse to promulgate the profit share bidding regulations which Congress most wanted to see. Defendants state the issue is whether the OCS Act requires the promulgation of regulations for each of the enumerated bidding systems and submit that even if this is true, the main inquiry is whether the pace of issuing regulations is in accordance with the law.
Plaintiffs rely on the legislative history and the statute to support their contentions. Their arguments, however, merely reflect the intent of Congress to have the Secretary of Interior retreat from the sole and exclusive use of the cash bonus-fixed royalty bidding system and to develop and use other systems which promise to meet the goals and policies of the 1978 Amendments. Plaintiffs urge the Court to find that Congress mandated the use of only non-cash bonus bidding systems in lease sales in order to achieve fair market value. Plaintiffs also appear to suggest that the amendments require bidding systems "other than cash bonus" rather than "in addition to cash bonus."
The OCS Act on its face authorizes four cash bonus bidding systems, including the traditional cash bonus-fixed royalty. There is evidence in the record tending to establish that leases offered under this traditional system may not produce a fair return and indeed may be anti-competitive; however, this evidence was within the knowledge of Congress before its enactment of the statute and the system was nonetheless expressly retained, albeit with limitations, for use during the five-year plan.
Plaintiffs do appear to categorize, as defendants contend, all cash bonus bidding systems under one rubric: cash bonus-fixed royalty. Enumerated in the OCS Act, however, are cash bonus systems with differing royalties which may result in a fair return as previous experience with the sliding scale royalty seems to indicate. It also appears clear from the OCS Act and the legislative history that the Secretary of Interior must report to Congress the use and non-use of the various bidding options. This may well indicate that even if regulations had been promulgated for all enumerated systems, it cannot be said that the Secretary is abusing his discretion solely because the variable net profit share bidding system is not being utilized in the September 1980 sale. Certainly, the evidence of record does not support such a finding.
Further, the Court is not persuaded that the statute and legislative history clearly prohibit leasing until all the enumerated bidding regulations are promulgated. On the contrary, the statute provides in pertinent part:
After the leasing program has been approved by the Secretary, or after eighteen months following September 18, 1978, whichever first occurs, no lease shall be issued unless it is for an area included in the approved leasing program and unless it contains provisions consistent with the approved leasing program, except that leasing shall be permitted to continue until such program is approved and for so long thereafter as such program is under judicial or administrative review pursuant to the provisions of this subchapter. (Emphasis added).
43 U.S.C.A. § 1344(d)(3) (West Supp.1979). However, the Court is persuaded that under certain circumstances, the leasing program may be subject to further judicial scrutiny notwithstanding the above.
The sale which plaintiffs seek to enjoin constitutes the first sale scheduled under the five-year leasing program. The September sale utilizes over 50% of the enumerated bidding systems and, in addition, does not appear to violate the statutory limitations on the use of cash bonus-fixed royalty bidding. After full consideration, the Court finds and concludes that plaintiffs have failed to clearly demonstrate a strong likelihood of success on the merits.
Balancing the Equities
The Public Interest
Plaintiffs contend that the public interest would be best served by a delay in the lease sales in that injury to the public through reduced revenues and competition would be alleviated. Plaintiffs view any delay resulting from an injunction as necessarily being of short duration as defendants, in their view, have the necessary analyses to promulgate regulations for all systems but are purposefully "stonewalling" apparently to protect certain interests. Defendants, on the other hand, contend that the granting of a preliminary injunction would unduly delay lease sales and ultimately frustrate the overriding thrust of the entire OCS Act, which is to expedite development of the outer continental shelf. Defendants deny that the delay would be short and maintain that it would work to the detriment of the public interest. First, because of the complexities involved in promulgating regulations for the remaining bidding systems, the delay could be a year or more in length. Secondly, this delay would force the Secretary to compress the enjoined sales into a later period of the five-year plan. Thus, defendants argue there is a serious question whether bidders would have the resources to participate in sales appearing in such rapid succession, which in turn could result in declining production and an increased dependence on foreign oil and gas.
In striking a balance between these divergent views, the Court finds and concludes that defendants have not clearly demonstrated that more harm will result to them from a denial of the injunction than will result to defendants from its grant. Further, the Court is convinced that plaintiffs have not clearly demonstrated that the public interest will be served by the issuance of an injunction.
Upon consideration of the pleadings, the motion for partial summary judgment or, in the alternative, for preliminary injunction, the opposition thereto, the memoranda of points and authorities submitted by the parties, the argument of counsel, the record, and the reasons stated herein, the Court finds and concludes that the motion of plaintiffs should be denied.
WHEREFORE, it is this 17th day of September, 1980,
ORDERED that the motion of plaintiffs for partial summary judgment or, in the alternative, for a preliminary injunction be and hereby is denied.