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Noble Energy, Inc. v. Jewell

United States District Court, District of Columbia

June 8, 2015

NOBLE ENERGY, INC., Plaintiff
v.
SALLLY JEWELL, et al., Defendants

MEMORANDUM OPINION

COLLEEN KOLLAR-KOTELLY, District Judge.

Plaintiff Noble Energy, Inc., challenges an order from the United States Department of the Interior Bureau of Safety and Environmental Enforcement ("BSEE" or the "agency") requiring it to permanently plug an offshore well, Well OCS-P 0320, No. 2, including related decommissioning activity. BSEE asserts the authority to require Noble Energy to plug the well under its decommissioning regulations, found at 30 C.F.R. §§ 250.1700-1754, issued pursuant to the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq. Noble Energy argues that when its contractual obligations were discharged-under the common law doctrine of discharge-its obligations under the regulations were discharged as well. As explained further below, in the April 9, 2014, Order under review-on remand as a result of an action challenging a previous order of the agency-BSEE concluded that the decommissioning regulations do not incorporate the common law doctrine of discharge and, therefore, the regulations require Noble Energy to fulfill the decommissioning obligations. Ultimately, the question for the Court is whether the agency's interpretation of the decommissioning regulations is reasonable. If it is, then Noble Energy's challenge fails. Presently before the Court are Plaintiff Noble Energy, Inc.'s [19] Motion for Summary Judgment and Defendants' [21] Cross-Motion for Summary Judgment. Upon consideration of the pleadings, [1] the relevant legal authorities, and the record as a whole, the Court GRANTS Defendants' [21] Cross-Motion for Summary Judgment and DENIES Plaintiff's [19] Motion for Summary Judgment. The Court concludes that the agency's interpretation of its decommissioning regulations is reasonable and, therefore, the Court upholds the challenged order. This case is dismissed in its entirety.

I. BACKGROUND

The factual and regulatory background to this case were previously recited at length in Noble Energy, Inc. v. Salazar (" Noble I "), 770 F.Supp.2d 322 (D.D.C. 2011), and Noble Energy, Inc. v. Salazar (" Noble II "), 671 F.3d 1241 (D.C. Cir. 2012). The Court recites here only the background essential to the Court's resolution of the currently pending motions. The Court reserves further presentation of the facts for the issues discussed below.

Pursuant to a lease acquired in 1979, Noble Energy[2] drilled an exploratory oil well, Well OCS-P 320, No. 2, off the coast of California. Noble II, 671 F.3d at 1242. Following a common practice, Noble Energy temporarily plugged and abandoned the well in 1985 after discovering oil and gas through its exploratory activities. Id. The well remains temporarily plugged and abandoned today, and the question in this case is whether BSEE can require Noble Energy to permanently plug that well. See id. Beginning at that time, Noble Energy received multiple suspensions of the lease. In 1999, Noble Energy received a four-year suspension, which ultimately became the final suspension of the lease. This lease suspension was revoked as a result of the determination by a court in the Northern District of California that the suspension "had not been assessed for consistency with California's coastal management plan" as required by the 1990 amendments to the Coastal Zone Management Act, 16 U.S.C. § 1451 et seq. Id. at 1243; see also California ex rel. Cal. Coastal Comm'n v. Norton, 150 F.Supp.2d 1046, 1053, 1057 (N.D. Cal. 2001), affirmed 311 F.3d 1162, 1173 (9th Cir. 2002). Subsequently, the Court of Appeals for the Federal Circuit affirmed a determination by the Court of Federal Claims that "the government had effectively repudiated the lease agreements by putting into practice the new [court-mandated] rules applicable to the availability of requested suspensions.'" Noble II, 671 F.3d at 1243 (quoting Amber Res. Co. v. United States, 538 F.3d 1358, 1370 (Fed. Cir. 2008)) (alteration in original). Noble Energy and other lessees, together, received $1.1 billion in restitution. Id. In addition, pursuant to the common law of discharge, [3] Noble Energy (along with the other lessees) was discharged from all of the obligations arising from its lease, including the obligation to "remove all devices, works, and structures from the premises no longer subject to the lease." Id.

One year after the Court of Appeals for the Federal Circuit resolved the litigation pertaining to the government's breach of Noble Energy's lease, the Minerals Management Service, [4] a now-disbanded agency of the Department of the Interior, ordered Noble Energy to "promptly and permanently plug the well, " "clear the well site, " and "perform any additional activity necessary to fully satisfy your decommissioning obligations" pursuant to 30 C.F.R. 250.1723 and related decommissioning regulations. Id. at 1244. Noble Energy challenged that order in an action in this judicial district, arguing that the government's material breach of its lease discharged its obligations under the regulations on which the agency relied. Id. Another judge in this district determined that "the common law doctrine of discharge did not relieve Noble of the regulatory obligation to plug its well permanently, an obligation that the lease did not itself create." Id. Noble Energy appealed, and the Court of Appeals for the D.C. Circuit concluded that the outcome of the case depended on the meaning of the decommissioning regulations: "If the regulations impose an obligation to plug Well 320-2 regardless of the government's breach of the lease contract, Noble's argument fails. If the regulations release the duty to plug once the government materially breaches the lease agreement, then Noble prevails." Id. at 1245. The Court of Appeals also concluded that the agency was "entitled to interpret its own regulations in the first instance.'" Id. (quoting Am. Petroleum Inst. v. EPA, 906 F.2d 729, 742 (D.C. Cir. 1990)). However, the Court of Appeals was unable to discern whether the agency had, in the original order that was then before that court, interpreted the regulations in question. Id. at 1244. Therefore, the Court of Appeals instructed the District Court to vacate the order of the Minerals Management Service and to remand to BSEE-which had assumed the responsibilities of the Minerals Management Service relevant to this action-for further proceedings. Id. at 1246.

On remand, the BSEE issued the April 9, 2014, Order that is the subject of this challenge. In the order, the BSEE interpreted the regulations in question and determined that they were independent of the obligations of the lease and were, therefore, not discharged by the government's material breach of the lease. NOB0957-63. Accordingly, the agency ordered Noble Energy to "promptly and permanently plug" the well, including "all related activity necessary to fully satisfy its decommissioning obligations, including wellhead and casing removal and site clearance." NOB0957. This challenge followed, and Noble Energy once again argues that the agency action is arbitrary, capricious, an abuse of discretion, and/or otherwise not in accordance with law.

II. LEGAL STANDARD

Under Rule 56(a) of the Federal Rules of Civil Procedure, "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." However, "when a party seeks review of agency action under the APA [before a district court], the district judge sits as an appellate tribunal. The entire case' on review is a question of law." Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001). Accordingly, "the standard set forth in Rule 56[ ] does not apply because of the limited role of a court in reviewing the administrative record.... Summary judgment is [ ] the mechanism for deciding whether as a matter of law the agency action is supported by the administrative record and is otherwise consistent with the APA standard of review." Southeast Conference v. Vilsack, 684 F.Supp.2d 135, 142 (D.D.C. 2010).

The APA "sets forth the full extent of judicial authority to review executive agency action for procedural correctness." FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513 (2009). It requires courts to "hold unlawful and set aside agency action, findings, and conclusions" that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). "This is a narrow' standard of review as courts defer to the agency's expertise." Ctr. for Food Safety v. Salazar, 898 F.Supp.2d 130, 138 (D.D.C. 2012) (quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)). An agency is required to "examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made." Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43 (internal quotation omitted). The reviewing court "is not to substitute its judgment for that of the agency." Id. Nevertheless, a decision that is not fully explained may be upheld "if the agency's path may reasonably be discerned." Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974).

III. DISCUSSION

Relying largely on statements in United States v. Texas, 507 U.S. 529 (1993), regarding the relationship of statutory or regulatory schemes and prior common law doctrines, Noble Energy argues that the decommissioning regulations incorporate the common law of discharge. Noble Energy argues that it is not subject to the decommissioning obligations enumerated in those regulations given the government's material breach of the lease that encompassed Noble Energy's rights in Well OCS-P 320, No. 2. Pursuant to the interpretation stated in its 2014 Order, BSEE argues that the decommissioning regulations are independent of the contractual obligations in the lease agreement. Therefore, the agency argues, the obligations established by the regulations have not been discharged-notwithstanding the undisputed material breach by the government of the lease and the discharge of Noble Energy's contractual obligations. The Court concludes, first, that it must defer to the agency's interpretation of its own regulations and, second, that the interpretation of those regulations is reasonable. Given these conclusions, the Court also concludes that the principle of United States v. Texas , does not yield the result- advocated by Plaintiff-that the regulatory decommissioning obligations were discharged by the government's breach of the lease. Accordingly, Plaintiff's challenge fails, and Noble Energy is required to comply with the decommissioning requirements of the regulations.

A. Deference is Due to the BSEE's Interpretation of Its Regulations

As the Court of Appeals stated in Noble II, "[r]esolution of this dispute depends on what the plugging regulations mean." 671 F.3d at 1244. Therefore, the Court first addresses whether deference is due to the agency's interpretation of the regulations at stake, and concludes that deference is due. It is well-settled precedent that the Court reviews the agency's "interpretation of its own regulations with substantial deference, ' allowing that interpretation to control unless plainly erroneous or inconsistent with the regulation.'"[5] U.S. Postal Serv. v. Postal Regulatory Comm'n, No. 13-1308, 2015 WL 2191023, at *9, ___ F.3d ___ (D.C. Cir. May 12, 2015) (quoting Thomas Jefferson University v. Shalala, 512 U.S. 504, 512, 514 (1994)). Plaintiff argues that, because this case involves the application of the interpretive principle stated in United States v. Texas -regarding the common law background of statutes-that the usual principles of deference to administrative agencies do not apply. See Pl.'s Reply & Cross-Opp'n at 9. Plaintiff offers no authority in support of that principle-nor do the cases cited elsewhere in Plaintiff's brief support that proposition. To the contrary, the opinion of the Court of Appeals in Noble II strongly suggests that deference is due. The Court of Appeals concluded that remand to the agency was necessary because "an agency is entitled to construe its own regulations in the first instance.'" Noble II, 671 F.3d at 1246 (quoting Am. Petroleum Inst., 906 F.2d at 742). Moreover, the Court of Appeals considered whether to defer to any interpretation in the government's litigation brief pursuant to the rule of Auer v. Robbins, 519 U.S. 452, 262 (1997). The Court of Appeals, however, concluded that Auer deference was not due in those circumstances only because the panel could not "find any definitive interpretation of the plug and abandon regulations in the government's brief." Noble II, 671 F.3d at 1246. If Auer deference would have been due to an interpretation in the government's brief, then ...


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