Moncrief v. United States Department of Interior

          MEMORANDUM OPINION [## 19, 21, 24]

          RICHARD J. LEON, UNITED STATES DISTRICT JUDGE

         Plaintiff W.A. Moncrief, Jr. ("Moncrief"), the holder of a federal oil and gas lease in Montana, brings suit against the United States Department of Interior ("Interior") and the Director of the Montana Bureau of Land Management ("BLM") (collectively, "federal defendants" or "the Government") relating to the Government's cancellation of his lease after suspending all oil and gas drilling and extraction activity on that lease for more than thirty years. See Compl. [Dkt. # 1] ¶¶ 9-11, 48-59. 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 Compl. ¶¶ 60-86. Before this Court are the parties' Cross-Motions for Summary Judgment. See PL's Motion for Summary Judgment [Dkt. #19] ("PL's Mot."); Defs.' Cross-Motion for Summary Judgment [Dkt. # 21] ("Defs.' Mot."); Df.-Intervenor's Cross-Motion for Summary Judgment [Dkt. # 24] ("Df-Intervenor's Mot."). For the following reasons, the plaintiffs motion for summary judgment [Dkt. # 19] is GRANTED and defendants' motions [Dkt. ## 21, 24] are DENIED.

         Background

         I. Procedural History

         The W.A. Moncrief ("Moncrief') lease is one of several leases located in the Badger-Two Medicine ("Badger-Two") area in the Lewis and Clark National Forest in northwestern Montana.^[1] In 1981, the United States Forest Service ("Forest Service") prepared a 165-page Environmental Assessment ("EA") of oil and gas drilling in the Lewis and Clark National Forest, including the Badger-Two area. See Non-Wilderness Leasing Environmental Assessment, Joint Appendix ("J.A.") Vol. VI [Dkt. # 32-3] at 44-54 (FS-HC-014364-014434). The EA considered alternatives to leasing, including "no action" type alternatives, and engaged in American Indian Religious Freedom Act consultation with the Blackfeet Tribe. See Id. at 50 (FS-HC-014404). The Forest Service ultimately issued a Decision Notice ("DN") and Finding of No. Significant Impact ("FONSI"), approving "Alternative 3" which 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. at 45-46 (FS-HC-014365-66).

         The Forest Service issued Federal Lease No. 53320 to Randall L. Weeks ("Weeks") on June 1, 1982. See Issuance of Lease, J.A. Vol. I [Dkt. # 31-1] at 69-80 (BLM-M000764-774). Weeks subsequently sold the lease to Atlantic Richfield Corporation C'ARCO") in December 1983 for $1.3 million. See 1/13/84 Lease Assignment, J.A. Vol. I at 49 (BLM-M000687). In May 1988, ARCO requested a suspension of the lease while BLM was considering applications for permits to drill ("APD") on other leases in the Badger-Two area, including the leases owned by Fina Oil (subsequently acquired by Solenex LLP) and Chevron, see 6/1/88 DOI Letter to ARCO, J.A. Vol. I at 68 (BLM-M000746), intending that suspension to "terminate upon completion of the Environmental Impact Statement for [the] pending application[s]., .at which time the BLM and Forest Service would consider other drilling proposals." Id. It was with the understanding that this was a "temporary suspension" that W.A. "Monty" Moncrief purchased the lease for "substantial consideration" on March 1, 1989. See 6/1/82 Lease Assignment, J.A. Vol. I at 66-67 (BLM-M000740-741); see also Decl. of C.B. Moncrief ("Moncrief Decl.") [Dkt. # 19-2] ¶3.

         The Forest Service and BLM prepared a joint Environmental Impact Statement ("EIS") and approved the Fina and Chevron APDs in 1991. See Forest Service ROD, J.A. Vol. I at 106-07 (FS002148-2149). The BLM and Forest Service later withdrew approval to seek further review of traditional practices in the Badger-Two area, but then approved the Fina and Chevron APDs again in 1993. See 1/15/93 BLM Letter to Fina Approving APD with Conditions, J.A. Vol. I at 108 (FS002207). Yet even though the Chevron and Solenex APDs had been approved, BLM continued to suspend leases in the Badger-Two Medicine area from 1993-1998, including the Moncrief lease. See generally Defs.' Mot. at 7-9; PL's Mot. at 12.^[2] In 2002, after consultation with the Blackfeet Nation under Section 106 of the NHPA, a portion of Badger-Two area was designated as a "traditional cultural district" or "TCD." See 1/31/02 Determination of TCD Eligibility Notification, J.A. Vol. IV [Dkt. #32-1] at 201 (FS005942). This area did not originally include the Solenex proposed well location or the Moncrief lease. See 2002 Map of Badger-Two Medicine TCD, J.A. Vol. I at 163 (FS004000). However, after 10 years of continued consultation, additional acreage including the Moncrief Lease was added to the TCD in 2012. See 9/21/15 ACHP Final Comments, J.A. Vol. I at 3-11 (FS006584-6592); 6/20/13 Letter re Boundary Expansion, J.A. Vol. IV at 223 (FS006010); 2014 Map of Badger-Two Medicine TCD, J.A. Vol. II [Dkt. #31-2] at 20 (FS004742).

         Curiously, the Forest Service did not make a determination of adverse effects under the NHPA until 2014, - finding that there were no mitigation measures agreeable to the Blackfeet Tribe that would allow for development in the Badger-Two area. See 12/3/14 Determination of Adverse Effects, J.A. Vol. V [Dkt. # 32-2] at 69-79 (FS006532-654). Additional consultations took place in 2015. See Defs.' Mot. at 10. On September 21, 2015, the Advisory Council of Historic Preservation ("ACHP") recommended that the Departments of Interior and Agriculture cancel the Solenex lease. See ACHP Comments, J.A. Vol. VI at 8 (FS006590). Then on March 17, 2016, BLM disapproved Solenex's APD and cancelled its lease, claiming that the initial NEPA and NHPA analyses upon which its leasing decision was based were inadequate. See Defs.' Mot. at 11.

         In late 2016, a Moncrief employee received a phone call informing it that its lease would likely be cancelled as well. See Dels.' Answer ¶ 56; Email Messages, J.A. Vol. 1 at 32 (BLM-M000665). Moncrief s attorneys sent a letter to Interior on November 23, 2016, requesting that the lease not be cancelled and also requesting a hearing. See 11/23/16 WPD&N Letter, J.A. Vol. 1 at 84-85 (BLM-M000801-802). Interior never responded to Moncrief s request for a hearing, but sent a letter decision administratively cancelling the Moncrief Lease on January 6, 2017, in the waning days of the Obama administration. See 1/6/17 Letter to Moncrief, J.A. Vol. 1 at 36-48 (BLM-M000670-682). Interior concurrently published a press release on January 6, 2017 noting that all leases in the Badger-Two area were being terminated. See 1/6/17 Press Release, J.A. Vol. 1 at 83 (BLM-M00800). Moncrief filed suit against Interior and BLM in this court on April 5, 2017, Thus, I now must review the lawfulness of federal defendants' cancellation of the Moncrief lease.

         II. Regulatory Landscape

         Plaintiff Moncrief argues that the agency's 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). The Department of Interior has also promulgated its own regulations governing the cancellation of leases. See 43 C.F.R. §3108.5. Namely, 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 the lease could be "improperly issued" is by non-compliance with the National Environmental Policy Act ("NEPA") and the National Historic Preservation Act ("NITPA"). Defs.' Mot. at 13. 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. §§ 1501.3, 1501.4(c).^[3] Nevertheless, an "agency is not constrained by NEPA from deciding that other values outweigh the environmental costs." Robertson, 490 U.S. at 350.

         Federal defendants also allege that the lease at issue was in violation of the National Historic Preservation Act ("NHPA"). Defs.' Mot. at 14. NFIPA 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 and seek its comments. 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); see also Nat'l Parks Conservation Ass'n v. United States ("NPCA "), 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). But, importantly here, neither NEPA nor NHPA dictates a substantive outcome. 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 ...