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Solenex LLC v. Jewell

United States District Court, District of Columbia

September 24, 2018

SOLENEX LLC, Plaintiff,
SALLY JEWELL et al., Defendants.

          MEMORANDUM OPINION [DKTS ## 89, 93]


         Plaintiff Solenex LLC ("Solenex"), the holder of a federal oil and gas lease in Montana, brings suit against the Secretary of the Interior, the Secretary of Agriculture, the Director of the Bureau of Land Management, the Chief of the Forest Service, and several other subordinate federal officials (collectively, "federal defendants" or "the Government") relating to the Government's cancellation of its lease after suspending all oil and gas> drilling and extraction activity on that lease for more than thirty years. See First Amend. Compl. [Dkt. # 73] ¶¶ 3-13, 99-115. 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 First Amend. Compl. ¶¶ 116-158. Before this Court are the parties' Cross-Motions for Summary Judgment. See Pl's Motion for Summary Judgment [Dkt. #89] ("Pl's Mot."); Defs.' Cross-Motion for Summary Judgment [Dkt. # 93] ("Defs.' Mot.").

         For the following reasons, the Court GRANTS the plaintiffs motion for summary judgment and DENIES the defendant's cross-motion for summary judgment.


         I. Regulatory Landscape

         Plaintiff Solenex seeks declaratory and injunctive relief for federal defendants' alleged violations of the Administrative Procedure Act ("APA"), 5 U.S.C. § 551 etseq., by cancelling the Solenex lease after holding it in suspension for more than thirty years. Plaintiff raises several independent reasons for finding that federal defendants acted unlawfully: (1) federal defendants lack authority to cancel the lease both because the Secretary exceeded his authority and because his cancellation was arbitrary and capricious, (2) the cancellation is time barred by a statutory limitations period or, alternatively, the doctrine of laches, (3) defendants are estopped from cancelling the lease by a pattern of conduct treating the lease as valid, and (4) the lease was properly issued in compliance with NEPA and the NHPA. A brief overview of these is in order.

         First, plaintiff argues that the Department of Interior's ("Interior") 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 non-producing lease, id. § 188(b). Interior has also promulgated its own regulations allowing for administrative cancellation of leases under certain conditions. See 43 C.F.R. § 3108.5. Namely, that 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 a lease can be "improperly issued" and therefore subject to administrative cancellation is by non-compliance with either the National Environmental Policy Act ("NEPA") or the National Historic Preservation Act ("NHPA"). Defs.' Mot. at 27-29. NEPA requires that agencies take a "hard look" at the environmental consequences, Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 350 (1989), of "major Federal actions" that "significantly affect [] the quality of the human environment." 42 U.S.C. § 4332(C); 40 C.F.R. §§ 150.3, 1501.4(c).[1] Nevertheless, an "agency is not constrained by NEPA from deciding that other values outweigh the environmental costs." Robertson, 490 U.S. at 350. NHPA, for its part, 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 ("ACHP"). 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); cf. Nat'l Parks Conservation Ass'n v. United States, 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). Importantly, while both of these statutes require agencies to follow certain procedures to gather information to help assist with decision-making, they do not themselves impose substantive requirements with respect to the outcome of that decision-making. 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 (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. § 7O6(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 (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, 136 S.Ct. 2117, 2126 (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 administrative law is that, when an agency decides to depart from decades-long past practices and official policies, the agency must at a minimum acknowledge the change and offer a reasoned explanation for it."). It is through this lens that I view the Bureau of Land Management's relatively recent decision to cancel the Solenex lease for purported pre-lease violations of NEPA and NHPA after holding it in suspension for over three decades!

         II. Procedural History

         The circumstances underlying this case date back to May 24, 1982, when the Bureau of Land Management ("BLM") approved federal oil and gas Lease M-53323 to Solenex's predecessor, Sidney M. Longwell ("Longwell"). See Statement of Material Facts in Support of Pis.' Mot. for Summary Judgment ("PSOF")[2] ¶¶ 11-21. BLM issued the lease after conducting a 165-page Environmental Assessment ("1981 EA") covering nearly 200 pending leases in the Badger Two Medicine ("Badger-Two") area of the Lewis and Clark National Forest in cooperation with the United States Forest Service ("Forest Service"). Id. ¶¶ 1-9. The 1981 EA considered the effects on the environment of various alternatives to leasing, including "no action" alternatives. See Id. ¶¶ 4, 5. In addition to the EA, the Forest Service also engaged in American Indian Religious Freedom Act consultation with the Blackfeet Tribe. Id. ¶ 4. Ultimately, the Forest Service issued a Decision Notice ("DN") and Finding of No. Significant Impact ("FONSI"), id. ¶ 6, approving "Alternative 3" which conditionally granted leases "with surface occupancy...only for accessible areas that could be protected" and provided that "[a]fter lease issuance, any proposed oil and gas activities would be fully analyzed under NEPA." Id. ¶ 5.

         Longwell subsequently assigned his lease to a company called Fina in June 1983.. Id. In November of that year, Fina submitted an Application for Permit to Drill ("APD") an exploratory well to BLM. Id. Two years later, after considering the adverse environmental effects of approving the APD, the Forest Service issued a 318-page EA ("1985 EA") evaluating and ultimately approving it. Id. ¶ 30. The 1985 EA expressly incorporated the earlier 1981 EA approving the lease itself. The 1985 EA also documented consultation with other agencies required by law, id. ¶ 29, and with the Blackfeet Tribe. See Id. ¶ 30. The Forest Service expressly found that the APD would not affect the Tribe's reserved rights in the ceded strip and that "[n]o religious sites or activities were identified in the project area..." Id. On an administrative appeal, the IBLA upheld the approval but remanded for further consideration of four issues. Id. ¶¶ 31-32. Despite the approval of the Fina APD, in 1993 BLM suspended the lease for further environmental assessments. Id. BLM then suspended the lease every year after that for nearly twenty years. Id.

         Solenex brought this suit in 2013 against the Secretary of the Interior, the Secretary of Agriculture, the Director of the Bureau of Land Management, the Chief of the Forest Service, and several other subordinate federal officials relating to the suspension of all oil and gas drilling and extraction activity on that lease. See generally First Amend. Compl, [Dkt. # 1]. On July 27, 2015, this Court partially granted Solenex's motion for summary judgment on federal defendants' suspension of its lease, finding that defendants' 29-year delay in reviewing the suspended lease constituted unreasonable delay under the APA. See 7/27/15 Order Granting Partial Summary Judgment to Solenex LLP ("7/27/15 Order") [Dkt. #52]. Accordingly, I ordered defendants to submit, within 21 days, a "proposed accelerated schedule" of the remaining tasks to be completed in the administrative process. Id. at 5.

         On August 17, 2015, defendants submitted a proposed schedule, see Dels.' Response to Order of the Court ("Defs.' Response") [Dkt. # 53], that I found deficient in several respects, including that: (1) it proposed that defendants have until July 15, 2017 to complete compliance under NEPA and lift the suspension on the lease; and (2) it lacked any explanation as to why this much time is necessary to determine whether-after 33 years and four APD approvals-the lease was "improperly issued" under 43 C.F.R. § 3108.3(d). See 10/8/15 Mem. Order [Dkt. # 57] at 3; see also Transcript of 10/6/15 Proceeding [Dkt. #56], As such, I rejected defendants' proposal as unreasonable and ...

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