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AMOCO PROD. CO. v. FRY

October 12, 1995

AMOCO PRODUCTION CO., et al., Plaintiffs,
v.
THOMAS A. FRY, et al., Defendants.



The opinion of the court was delivered by: LAMBERTH

 This matter comes before the court on the parties' cross-motions for summary judgment. Upon consideration of the parties' submissions and the relevant law, for the reasons set forth below, the court will grant defendants' motion for summary judgment, and deny plaintiffs' motion for summary judgment.

 I.

 BACKGROUND

 Plaintiffs in this case are oil companies *fn1" who pay monthly mineral royalties *fn2" to the federal government pursuant to various federal gas and oil leases. *fn3" Defendants are officials in the government agencies *fn4" that administer the federal gas and oil leases, the primary agency being the Mineral Management Service ("MMS") of the Department of the Interior ("DOI").

 For various reasons, plaintiffs often overpay their monthly royalty payments. Such overpayment is recoverable, however, if the payor files a timely request for credit or refund pursuant to the Outer Continental Shelf Lands Act, 43 U.S.C.A. § 1331-56 (1986 & West Supp. 1995) ("OCSLA").

 A. Section 10 of the OCSLA

 Section 10 of the OCSLA grants the Secretary of the DOI ("Secretary") authority to credit or refund OCSLA royalty overpayment when two conditions are met. First, it must appear "to the satisfaction of the Secretary" that the payor made a royalty overpayment "in excess of the amount he was lawfully required to pay." 43 U.S.C.A. § 1339(a). Second, Congress must be given an opportunity to review the proposed credit or refund. The Secretary must send a report to Congress regarding the amount of credit to be given to whom and a summary of the factual basis for the decision. "No refund or credit for such excess payment shall be made until after the expiration of thirty day" from the time the Secretary reports to Congress. *fn5" Id. at § 1339(b).

 Once the Congressional report-and-wait period expires, and "it appears to the satisfaction of the Secretary" that a lessee has overpaid an OCS royalty payment, "such excess shall be repaid without interest." Id. at 1339(a). If the lessee desires a refund, the Secretary certifies the amount of the repayment to the Secretary of the Treasury, who issues the refund. If the lessee desires a credit toward future royalty payments, the MMS requires the lessee to await written permission from the MMS before taking a credit on future royalty payments.

 B. The MMS audit of OCSLA royalty payments

 The 1982, Congress directed the MMS to conduct audits of royalty payment records on federal and Indian leases. *fn6" The MMS conducted the audits and determined that plaintiffs owed potentially millions of dollars to the government for underpaid OCSLA royalties.

 Under the MMS audit procedures, if a systemic deficiency is discovered that may affect a variety of royalty payments, the MMS notifies the payor. Unless the payor demonstrates that the MMS was in error, MMS will issue an order to recalculate and pay royalties the audit determined to be due. In this case, the MMS followed its audit procedures and issued "recalculate-and-pay" orders to plaintiffs. Plaintiffs refused to recalculate their past royalty payments and challenged the MMS orders, claiming, among other things, that the government was time barred from recovering the past due royalty payments by the statute of limitations in 28 U.S.C.A. § 2415(a) (1994). *fn7" The challenges to the MMS's collection of the past due royalties is the subject of litigation in various fora. *fn8"

 II.

 LEGAL STANDARD

 Summary judgment is appropriate where there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Inferences drawn from the facts must be viewed in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 26 L. Ed. 2d 142, 90 S. Ct. 1598 (1970). If summary judgment is to be denied, there must be evidence on which the jury could reasonably find for the non-moving party. Anderson v. Liberty Lobby, 477 U.S. 242, 252, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). If the non-moving party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial," summary judgment may be granted. Celotex, 477 U.S. at 322.

 III.

 ANALYSIS

 A. The requirements of the OCSLA

 Plaintiffs ask the court to enter a declaratory judgment that, under section 10 of the OCSLA, (1) the defendants cannot require the plaintiffs to await written permission from the MMS before taking credits on overpaid royalties, (2) the statute prohibits the MMS from claiming an administrative offset once it has reported the overpayment to Congress, and (3) the defendants must diligently process requests for refunds or credits. Because the court finds that the statute places no such requirements on the MMS, the requested relief will be denied.

 1. Written permission a valid requirement

 The first issue before the court is whether under section 10 of the OCSLA, the MMS can require a royalty payor to await written permission from the MMS before taking a credit toward future royalty payments. Plaintiffs argue that the OCSLA does not require royalty payors to await written permission from the MMS to take the credits. Indeed, the OCSLA imposes no express requirement of the MMS's written permission to take credits. But, when a "statute is silent or ambiguous with respect to the specific issue, the question for the court is whether the agency's answer is based on a permissible construction of the statute." Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 81 L. Ed. 2d 694, 104 S. Ct. 2778 (1984).

 Section 10 of the OCSLA is ambiguous on whether the same procedures are used to take credits toward future royalty payments as are used to refund overpayment. Although the OCSLA explicitly requires the expiration of the congressional report-and-wait period for refund or credit, no specific reference is made to the procedures the MMS and the DOI should use to convey the refunds or credits, or whether the same procedures should be followed for both manners of repayment. Because of the statute's silence as to procedures for allowing credits, the court finds that the defendants' interpretation of section 10 is permissible.

 Plaintiffs argue that defendants' concession that onshore federal leases do not require a lessee to await written permission before taking a credit toward future royalty payments makes defendants' interpretation of offshore leases impermissible. However, the statutes, policies, and procedures governing onshore leases differ markedly from those governing the OCS leases at issue. The OCSLA requires authorization from both the Secretary and Congress before credits may be taken; onshore leases have no such requirement. The plaintiffs cannot point to anything that would require the defendants to treat onshore and offshore leases similarly. The parties disagree over how long defendants' practice of requiring written authorization has been in effect, but plaintiffs concede that ...


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