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Bolack Minerals Co. v. Norton

March 31, 2005

BOLACK MINERALS COMPANY PLAINTIFF,
v.
GALE A. NORTON, SECRETARY OF THE UNITED STATES DEPARTMENT OF THE INTERIOR DEFENDANT.



The opinion of the court was delivered by: John D. Bates United States District Judge

MEMORANDUM OPINION

This case involves the status of a right-of-way to operate a communications site in Farmington, New Mexico, and the disposition of the land underlying the right-of-way. The United States issued the right-of-way to a radio station in 1981. At the time, the United States owned the land surrounding and underlying the right-of-way. Shortly thereafter, the United States issued a land patent to plaintiff Bolack Minerals Company for a large plot of its land in Farmington,"excepting and reserving from the patent" the right-of-way. The company operating the radio station went bankrupt soon thereafter, and the rental money owed to the government for the right-of-way went unpaid for many years.

Almost two decades later, Dan Bradshaw -- the owner of a paging company that is operating on the right-of-way site -- filed an application with the Bureau of Land Management ("BLM") to renew the right-of-way in his name. The BLM rejected that application, concluding that the right-of-way had long since expired for non-payment of rent. Bradshaw then filed an application to obtain a new right-of-way for the same communications site. The BLM rejected that application as well, holding that when the right-of-way expired, it had merged into the underlying fee simple estate owned by Bolack. Bradshaw took an appeal to the Interior Board of Land Appeals ("IBLA"), and Bolack intervened before the IBLA to defend the BLM decision.

The IBLA reversed the BLM's decision, concluding that the 1981 right-of-way was still in existence, and that the United States had reserved title to the land underlying the right-of-way when it initially issued the land patent to Bolack. The dispute has now made its way to this Court, with Bolack filing a Complaint against the Department of Interior seeking review of the IBLA opinion under the Administrative Procedure Act ("APA"), 5 U.S.C. § 706. The parties have fully briefed cross-motions for summary judgment. For the reasons explained below, the Court concludes that the IBLA decision was not arbitrary and capricious under the APA, and therefore enters judgment in favor of the Department of Interior.

BACKGROUND

On February 23, 1981, the BLM issued to E. Boyd Whitney a right-of-way to operate a communications site on land owned by the federal government in Farmington, New Mexico. AR 192. The right-of-way was given serial number NM 43307. AR 192.*fn1 The decision granting the right-of-way provides that its"permitted use" was the operation of a commercial FM broadcast station with call letters KRAZ-FM. AR 192. The"expiration date" of the right-of-way was"[t]o coincide with expiration of FCC license." AR 192. The right-of-way grant also contains several"Terms and Conditions," among them that the grant is "conditioned upon the presentation of the license granted by the Federal Communications Commission for the installation"; that"administrative costs and/or rentals" shall be"paid upon request"; and that the"right-of-way will be terminated in its entirety upon written notice from this office to the grantee; or its successor or assigns, if there has been failure to file the required FCC license within 90 days from date of this grant." AR 192-93.

On April 19, 1982, the United States issued a land patent to Tom Bolack conveying 6545.55 acres of land in Farmington, New Mexico. AR 37-38. The plot of land conveyed to Mr. Bolack encompassed the right-of-way. The terms of the patent expressly "except[ed] and reserv[ed]" to the United States "[t]hose rights-of-way and easements that have been granted and which are of record as follows," listing several rights-of-way by serial number, including NM 43307. AR 37-38. The patent also states that the land was"conveyed subject to" a provision advising Bolack that the patented land lies in a floodplain and that he is therefore barred by executive order from seeking compensation from the United States in the event the land is damaged by floods. AR 38. Some time after receiving the land patent from the United States, Tom Bolack conveyed the patented land to Bolack Minerals Company, the plaintiff in this case. Pl.'s Resp. to Def. Statement of Material Facts at 2.

On December 13, 1982, Whitney "d/b/a KRZE/KRAZ Radio Stations" filed a petition for bankruptcy protection. AR 50-51. On June 26, 1984, the BLM sent a certified letter to Whitney stating that a current FCC license was required for the right-of-way, and that it must be received within 30 days of receipt of the letter. AR 34. Within the thirty-day period, Whitney submitted an FCC license renewal authorization to the BLM. AR 712-14. This license renewal that Whitney sent to the BLM was granted on January 6, 1983, for a term expiring on October 1, 1983, but it also indicated that"operation beyond the license expiration date [was] authorized pending final determination" of a license application pending before the FCC. AR 712-14.

While all of this was occurring, the BLM had not yet determined the fair market value of the right-of-way grant for purposes of calculating the rent owed by Whitney for the right to use the communications site. In September 1984, the BLM finally approved an appraisal assessing the value of the land, and on October 15, 1984, the agency contacted Whitney to inform him that he owed four years' rental plus administrative charges. AR 693, 39. On November 9, 1984, Whitney requested reconsideration of the rental charges. AR 692. On January 28, 1985, the BLM wrote Whitney informing him that he now owed rent and costs only for the two-and-a half year period from February 23, 1981 (the date the right-of-way was granted) through October 1, 1983, on the theory that the right-of-way had expired along with the FCC license on that date. The letter stated that if payment was not received within 30 days, the account would be"referred to [BLM's] Solicitor for legal action." AR 41. Whitney never paid the assessed rent, and the record does not indicate that the BLM ever contacted Whitney again or took any action regarding the overdue rental charges.

The radio station property at the communications site was passed around in a series of transactions that eventually left the ownership of the property in a state of some doubt. On December 4, 1984, the bankruptcy court entered an order selling Whitney's station licenses, the real property relating to the radio stations, transmitters, transmitter sites (including easements), and other personal property to a bank. AR 521-22. The bank then sold the assets to an individual named Homer Pirkey. Pirkey operated the radio station until October 1, 1990, at which point he claims (and Dan Bradshaw agrees) that he sold the transmitter building and the transmitter tower on the right-of-way site to Dan Bradshaw, who began operating a paging company and two-way radio company on the site. AR 339, 523. Nonetheless, the record seems also to indicate that Bradshaw began leasing the communications site from Bolack in 1994. AR 216-53.

In 1998, Bradshaw began exploring the possibility of obtaining a right-of-way grant to the land directly from the BLM. Bradshaw visited the BLM office in June 1999, where a realty specialist retrieved the patent and"found that the [NM 43307 right-of-way] was reserved to the U.S." 161 IBLA at 122. After consulting with legal counsel at the BLM, the specialist determined that although"[n]o money for this [right-of-way] was ever received due to bankruptcy," the right-of-way"was reserved to the BLM" in the land patent, and therefore the right-of-way"was still BLM's." AR 47-48.

On June 16, 1999, Bradshaw filed a formal application to renew the NM 43307 right-ofway for a period of twenty years. AR 143-44. The BLM denied Bradshaw's application in a decision dated July 30, 1999. The decision explained that according to the FCC license renewal that Whitney had submitted in 1984, the FCC license was set to expire on October 1, 1983. The decision observed that Whitney never submitted evidence of another FCC license renewal, and added that no rent or administrative charges were ever paid for the right-of-way before Whitney filed for bankruptcy in 1982. The decision concluded that"this right-of-way expired October 1, 1983 for failure to submit a current FCC license before bankruptcy was filed," and thus"the request to renew this authorization is denied." AR 43.

However, the decision went on to inform Bradshaw that, according"to the information you gave the BLM, this facility has been in use since it was issued and you have been in ownership since 1988." AR 44. The decision added that"the right-of-way was reserved to the United States when patent was issued to Tom Bolack." Id. The decision therefore invited Bradshaw to apply for a new right-of-way on the same land by submitting filing fees, proof of ownership, back rental, and other information. The decision told Bradshaw that he could call the BLM if he had any questions concerning the decision. The decision did not state that it was a final order, or provide Bradshaw with any information on how he could take an appeal. Id.

Bradshaw then applied for a new right-of-way for the communications site. On November 19, 1999, the BLM denied this request as well. AR 585-97, 600-01. The BLM identified three reasons for the denial. First, the BLM found that the NM 43307 right-of-way had expired upon expiration of the FCC license (although the BLM revised the date it believed the FCC license had expired to October 1, 1998). AR 600. Second, the BLM observed that rent and fees had never been paid on the right-of-way, and that"this would serve as independent grounds for termination." AR 600. Finally, the BLM noted that it had never received formal notice of the transfer of NM 43307 from Whitney's bankruptcy estate to Pirkey, and that BLM regulations provide that"[n]o assignment shall be recognized" unless it is approved in writing by an authorized officer. AR 600-01 (quoting 43 C.F.R. 2803.6-3). The BLM concluded that"[s]ince the R/W expired by it[s] own terms on October 1, 1988, the R/W was no longer in existence." AR 600.*fn2 This decision instructed Bradshaw that it could be appealed to the IBLA. AR 601.

Bradshaw appealed the November 19, 1999, decision, and Bolack intervened in the proceedings. AR 3 n.1; AR 330. On April 7, 2004, the IBLA reversed the BLM decision. The IBLA held that NM 43307 had never expired, concluding that under the governing law, the failure to submit proof of an FCC license or pay rent due on the right-of-way"did not result in an automatic termination," but instead required the BLM to"take action to terminate the right of way," something it never did. AR 345. The IBLA also held that the"right-of-way grant did not expire by reason of the failure to maintain a valid FCC license to operate," because the FCC had reported to the IBLA that the FCC license was valid from 1981 to at least May 2000 (the date of the report). AR 345. Finally, the IBLA interpreted the land patent to Bolack to reserve to the United States title to the land within the boundaries of the right-of-way, which includes the right to grant a new right-of-way to Bradshaw. AR 346-351. The IBLA remanded the case to the BLM"for action not inconsistent with this opinion." AR 352.*fn3 On May 6, 2004, Bolack brought this action against the Department of Interior seeking review of the IBLA decision under the APA. The parties' cross-motions for summary judgment are fully briefed and ready for decision.

STANDARD OF REVIEW

Under 5 U.S.C. § 706, a court reviewing the action of an agency "shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action." The reviewing court shall "hold unlawful and set aside agency action, findings, and conclusions found to be... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. The court should abide by the agency's factual findings if they are "supported by substantial evidence" and affirm the agency's orders so long as there is a rational connection between the facts found and the choice made. See Midwest ISO Transmission Owners v. FERC, 373 F.3d 1361, 1368 (D.C. Cir. 2004). The agency's decisions are entitled to a "presumption of regularity," Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415 (1971), and although "inquiry into the facts is to be searching and careful, the ultimate standard of review is a narrow one." Id. at 416.

When the court reviews an agency's interpretation of a statute, the court turns to the twostep analysis outlined in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The first step is determining whether Congress has spoken directly to the "precise question at issue," for if it has, "the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Id. at 842-43. If, however, the statute is silent or ambiguous on the specific issue, "the question for the court is whether the agency's answer is based on a permissible construction of the statute." Id. at 843 (emphasis supplied). When the agency's construction of a statute is challenged, its "interpretation need not be the best or most natural one by grammatical or other standards.... Rather [it] need be only reasonable to warrant deference." Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 702 (1991) (citations omitted).

The Supreme Court has stated flatly that reviewing courts "must give substantial deference to an agency's interpretation of its own regulations." Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994). When courts review an agency's construction of its own regulation, "courts owe great deference to the interpretation adopted by the agency and will uphold that interpretation if it is reasonable and consistent with the regulation." National Trust for Historic Preservation v. Dole, 828 F.2d 776, 782 (D.C. Cir. 1987). Only when an agency's interpretation of its own regulation is "manifestly unreasonable" should the court decline to accept that ...


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