Maralex Resources v. Barnhardt

FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS January 18, 2019
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
MARALEX RESOURCES, INC., a
Colorado corporation; ALEXIS M.
O'HARE; MARY C. O'HARE,
Plaintiffs - Appellants,
v. No. 17-1421
DAVID BARNHARDT, in his official
capacity as Acting Secretary of the United
States Department of the Interior; THE
UNITED STATES DEPARTMENT OF
INTERIOR; THE UNITED STATES OF
AMERICA,
Defendants - Appellees.
_________________________________
Appeal from the United States District Court
for the District of Colorado
(D.C. No. 1:15-CV-01893-CMA)
_________________________________
William E. Zimsky, Abadie & Schill, PC, Durango, Colorado, appearing for the
Appellants.
Tamara N. Rountree, Attorney, Environmental and Natural Resources Division, United
States Department of Justice, Washington, DC (Jeffrey H. Wood, Acting Assistant
Attorney General, and Eric Grant, Deputy Assistant Attorney General, United States
Department of Justice, Washington, DC; William Lazarus and John L. Smeltzer,
Attorneys, Environmental and Natural Resources Division, United States Department of
Justice, Washington, DC; and Philip C. Lowe, Rocky Mountain Regional Solicitor’s

In accordance with Fed. R. App. P. 43(c)(2), David Barnhardt is substituted
for Ryan Zinke, as the respondent in this action.
Office, Department of the Interior, Lakewood, Colorado, with her on the brief), appearing
for the Appellee.
_________________________________
Before BRISCOE, LUCERO, and MATHESON, Circuit Judges.
_________________________________
BRISCOE, Circuit Judge.
_________________________________
Plaintiffs Maralex Resources, Inc. (Maralex), Alexis O’Hare and Mary C.
O’Hare (the O’Hares) filed this action against the Secretary of the Department of the
Interior (Secretary), the Department of the Interior, and the United States seeking
review of a decision of the Interior Board of Land Appeals (IBLA) upholding four
Notices of Incidents of Noncompliance that were issued by the Bureau of Land
Management’s (BLM’s) Tres Rios Field Office to Maralex for failing to allow a
BLM representative to access certain oil and gas lease sites operated by Maralex on
land owned by the O’Hares. The district court affirmed the IBLA’s decision.
Plaintiffs now appeal.
Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we conclude that the
BLM, in issuing the Notices of Incidents of Noncompliance, lacked authority to
require plaintiffs to provide BLM with a key to a lease site on privately-owned land
or to allow the BLM to install its own locks on the gates to such lease site.
Consequently, we reverse and remand to the district court with instructions to enter
judgment in favor of plaintiffs on this “key or lock” issue.
2
I
The Parcel and its component Tracts
At issue in this case is a 320-acre parcel of land (the Parcel) that is located in
the S1/2 of Section 35, Township 34 South, Range 7 West in La Plata County in
southwestern Colorado. The Parcel, which is comprised of 240 acres of private
surface/mineral estate and 80 acres of Indian surface/mineral estate, lies over the
Ignacio Blanco gas field and the Fruitland coal formation.
The O’Hares own the surface and mineral estate in a 120-acre tract of land in
the SW1/4SE1/4 and E1/2SW1/4 of the Parcel (the O’Hare Tract). The Southern Ute
Indian Tribe (Tribe) holds the surface and mineral estate in the W1/2SW1/4 of the
Parcel (the Tribe Tract). The remainder of the Parcel (the Remainder Tract)—the
N1/2SE1/4 and SE1/4SE1/4—is privately-owned by the O’Hare family, J. Elmer and
Wanda Lee Kenner, and Irma Rowse.
The leases of the Tracts
On June 6, 1974, the Tribe, acting pursuant to the Indian Mineral Leasing Act
of 1938, 25 U.S.C. §§ 396a-396g (2012), issued to Sun Oil Company an Indian oil
and gas lease, Mining Lease Contract No. MOO-C-1420-1531, for its mineral estate
in the Tribe Tract. Amoco Production Company (Amoco) later took over as the
lessee.
3
On April 28, 1995, the O’Hares issued to Maralex1 a private oil and gas lease
for the O’Hare Tract. SG Interests III, Ltd. (SG III) later joined Maralex as co-
lessee.
The O’Hares, Kenners, and Rowse issued three private oil and gas leases
covering the Remainder Tract. SG III and Maralex became the lessees of those
leases.
The Communitization Agreement
In 1996, all of the parties (SG III, Maralex, the Tribe, the O’Hares, Kenners,
and Rowe) “communitized” their coal and gas interests in the Parcel under the terms
of a written agreement. More specifically, in a written Communitization Agreement
(CA) dated May 1, 1996, the parties agreed to develop and operate the Parcel “as an
entirety, with the understanding and agreement . . . that all Communitized Substances
produced therefrom [would] be allocated among the leaseholds comprising said area
in the proportion that the acreage interest of each leasehold bears to the entire
acreage interest committed to [the CA].” Aplt. App. at 3. The CA further stated, in
pertinent part, that “[t]he royalties payable on Communitized Substances allocated to
the individual leases comprising the [Tract] . . . shall be determined and paid on the
basis prescribed in each of the individual leases.” Id.
Two other provisions of the CA are relevant to this case. First, the CA stated:
“This agreement shall be subject to all applicable Federal and State laws or executive
1
According to the record on appeal, Mary O’Hare is the president of Maralex.
Aplt. App. at 8.
4
orders, rules and regulations . . . .” Id. at 4. In addition, the CA stated: “It is agreed
between the Parties Hereto that the Secretary of the Interior, or his duly Authorized
Officer, shall have the right of supervision over all operations within the
Communitized Area to the extent same includes the oil and gas lease(s) under which
the . . . Tribe is lessor and insofar as governed by applicable oil and gas regulations
of the Department of Interior.” Id. at 5.
The CA was approved by the Tribe and the Bureau of Indian Affairs (BIA)
effective May 1, 1996.
The wells operating under the CA
There are four wells associated with the CA and arising from the underlying
leases, all of which are operated by Maralex. The four wells are physically situated
in two areas on the O’Hares’ private surface estate in the O’Hare Tract. Each such
area is enclosed by a fence and a locked gate. All four of the wells are producing
“both fee and Tribal minerals” from the Fruitland coal formation. Id. at 32.
Although the oil and gas at issue is produced from private mineral interests and from
wells situated on private surface estates, such production is, under the terms of the
CA, allocated to all of the oil and gas interests, including that of the Tribe, as the
owner of record title to the mineral estate in the Tribe’s Section of the Parcel.
BLM’s attempt to inspect the wells
On February 11, 2013, Gabriel Trujillo, a Petroleum Engineering Technician
employed by the BLM, sent an email to Maralex stating that he planned to inspect the
four wells. On February 12, 2013, Christi Reid, a Maralex employee, responded by
5
email, noted that the wells were situated “on Mickey O’Hare’s property,” and stated
that she envisioned “problems with him granting access” to Trujillo. Id. at 18. One
day later, on February 13, 2013, Reid emailed Trujillo again, stating: “I talked to
Mickey O’Hare and let him know that you want to inspect the . . . wells. He wants to
talk to you directly . . . .” Id.
On February 22, 2013, Trujillo drove to the Parcel in an attempt to examine
the wells. Upon arrival, Trujillo found that there was a locked gate that prevented
him from examining the wells. That same day, Trujillo spoke by phone with Mickey
O’Hare. O’Hare informed Trujillo that he had no right to inspect the wells because
O’Hare owned both the surface and mineral rights.
BLM’s issuance of INCs to Maralex
On February 26, 2013, Trujillo completed four official BLM forms entitled
“Notice of Incidents of Noncompliance” (INC). Id. at 23. The INCs noted that
Trujillo had attempted unsuccessfully to access the wells on February 22, 2013. The
INCs, which were sent to Maralex, alleged that Maralex was in violation of 43 C.F.R.
§ 3162.1(b), and they gave Maralex until March 25, 2013, to provide Trujillo and the
BLM with access to the wells. In the “Remarks” section of the INCs, Trujillo stated:
“For corrective action, I will need a key to access the location or be able to put a
BLM lock in with it.” Id. at 24.
Maralex’s administrative appeal of the INCs
On March 27, 2013, a law firm representing Maralex and the O’Hares sent a
letter to BLM appealing the four INCs. The letter asserted that the BLM had
6
misinterpreted its authority to inspect oil and gas wells located on private land. More
specifically, the letter asserted that the BLM “ha[d] limited authority to inspect
facilities on Fee Tracts” and that the applicable regulations “only allow[ed] annual
inspections” of such wells. Id. at 33. The letter also asserted that “there [wa]s no
statutory authority nor . . . any legitimate justification for giving the BLM unbridled
discretion to search the facilities at issue in order to ensure that there [wa]s adequate
site security measurement and that Maralex [wa]s properly measuring the production
and operation of the wells.” Id. “Thus,” the letter asserted, “BLM’s request for a
key to any gates to conduct inspections [wa]s violative of Maralex’s constitutionally
guaranteed protection against unreasonable searches under the Fourth Amendment.”
Id. Lastly, the letter asserted that “there [wa]s no legal authority for the BLM’s
demand for unfettered access to the O’Hare’s surface.” Id. And the letter argued that
“[i]f the BLM was entitled to unfettered right to access O’Hare’s property under
Section 3162.1(b), it would constitute a regulatory taking of O’Hare’s property in
violation of O’Hare’s property rights as guarantee [sic] by the takings clause of the
Fifth Amendment.” Id. at 34.
On April 10, 2013, the BLM notified Maralex’s counsel that it was treating the
March 27, 2013 letter “as a request for State Director’s review (SDR) . . . under 43
CFR 3165.3.” Id. at 88.
On July 9, 2013, the BLM’s Deputy State Director, Energy, Lands, and
Minerals, Colorado State Office, sent a letter to Maralex’s counsel responding to
each point raised by Maralex’s counsel. The letter disagreed that the applicable
7
regulations allowed only for “annual inspections for fee tracts in a CA.” Id. at 90.
Rather, the letter asserted, the “inspected annually” language in the regulation merely
established a minimum standard as to what was to be accomplished. Id. As for its
authority to conduct inspections of the wells, the BLM noted that
Section 101(b) of the Federal Oil and Gas Royalty Management Act of
1982 (FOGRMA) provides that, “Authorized and properly identified
representatives of the Secretary may without advance notice, enter
upon, travel across and inspect lease sites on Federal or Indian lands
and may obtain from the operator immediate access to secured facilities
on such lease sites, for the purpose of making any inspection or
investigation for determining whether there is compliance with the
requirements of the minearal [sic] leasing laws and this Act.”
Id. at 90-91 (italics in original). The BLM in turn stated that “[s]ince the subject
wells’ production is subject to a federal CA and the government receives a portion of
the production’s royalty, the BLM is responsible for assuring production
accountability” and that “[t]his includes inspections for site security, proper handling,
measurement and reporting of production and protection against product theft.” Id. at
91. “Therefore,” the letter stated, “BLM must be allowed to perform the production
related inspection which necessitates physical access to the subject wells and their
associated facilities without advance notice.” Id. In a section entitled “Decision,”
the letter stated:
Upon review, the four INCs covering denied access to the subject
wells were properly issued and are upheld. The stay of enforcement
action granted in our April 10, 2013, letter to Maralex is hereby lifted.
Maralex must provide the BLM Tres Rios Field Office access
without advance notice as required by the INCs and the regulations. If
Maralex chooses not to provide access as required, Maralex will be
subject to assessments pursuant to 43 CFR 3163.1. In addition further
8
non-compliance shall result in proposed civil penalties pursuant to 43
CFR 3163.2(e)(1).
Id. at 93.
On August 20, 2013, Maralex’s counsel sent the BLM a notice of appeal of the
July 9, 2013 decision. Id. at 97. Maralex’s counsel followed that up by filing with
the IBLA a Statement of Reasons for Appeal. Id. at 98. The Statement of Reasons
argued that the regulation relied on by the BLM, 43 C.F.R. § 3162.1(b), applies only
“to Federal and Indian lease sites,” and that “there is no statutory authority to support
the BLM’s suggestion that it has the right to conduct warrantless searches of
Maralex’s facilities.” Id. at 113. “Thus,” the Statement of Reasons asserted, “BLM’s
request violates Maralex’s right not to be subject to unreasonable searches as
guaranteed by the Fourth Amendment.” Id. Lastly, the Statement of Reasons
asserted that “if the BLM does have the statutory and regulatory authority to access
the O’Hare’s Fee Tract at any time, such authority would constitute a regulatory
taking of the O’Hare’s property in violation of their due process rights under the
Fifth Amendment.” Id.
On July 10, 2015, the IBLA issued a written decision affirming the BLM’s
July 9, 2013 decision. In doing so, the IBLA did not address whether plaintiffs were
required to provide the BLM with a key or allow the BLM to install its own locks on
Maralex’s gates, nor did the IBLA address plaintiffs’ constitutional arguments.
The district court proceedings
9
On September 1, 2015, Maralex and the O’Hares initiated these proceedings
by filing a complaint in federal district court against the Secretary, the Department of
the Interior, and the United States. The complaint sought reversal of the IBLA’s
decision, as well as declaratory relief.
On October 19, 2017, the district court issued an order affirming the IBLA’s
determination. Plaintiffs now appeal.
II
Plaintiffs raise two issues on appeal: (1) whether they waived their argument
that the BLM lacked authority to require them to provide the BLM with keys to the
locked gates on the O’Hares’ private property or, alternatively, to allow the BLM to
place its own locks on those gates; and (2) whether the BLM has statutory or
regulatory authority to require plaintiffs to provide the BLM with keys to locked
gates on privately-owned lands or, alternatively, to allow the BLM to place its own
locks on such gates.2 As discussed in more detail below, whether plaintiffs waived
their argument is a close question, but assuming they did, we nevertheless exercise
discretion to address the underlying issue. We in turn conclude that BLM lacked
authority to impose the “key or lock” requirement.
Did plaintiffs waive their argument that the BLM lacked authority
to require them to provide keys to their locked gates or to allow the
BLM to place its own locks on those gates?
2
Until recently, plaintiffs asserted three additional issues on appeal, including
Fourth and Fifth Amendment challenges to the inspection protocol advocated by the
BLM. At oral argument, however, plaintiffs abandoned those issues. Consequently,
we do not address them.
10
As noted, plaintiffs first argue that the district court erred in concluding that
they waived their argument that the BLM lacked authority to require them to provide
the BLM with keys to locked gates or to allow the BLM to place its own locks on
those gates. The district court concluded that plaintiffs “did not present to the IBLA
this particular argument that the BLM’s corrective action exceeded its authority.”
Aplt. App. at 207-08. The district court in turn concluded “that Plaintiffs waived this
argument for purposes of this appeal and [it] decline[d] to consider it.” Id. at 208.
To resolve this issue, we begin by turning to the record. Plaintiffs, in their
initial appeal of the INCs, “claim[ed] that BLM ha[d] no statutory authority or
legitimate justification giving the BLM unbridled discretion to search the subject
well facilities in order to ensure site security and proper measurement” and that,
consequently, “the BLM’s request for a key to any gates to conduct inspections [wa]s
in violation of Maralex’s constitutionally guaranteed protection against unreasonable
searches under the Fourth Amendment.” Aplt. App. at 90.
In their appeal to the IBLA from the State Director’s decision denying their
initial appeal, plaintiffs argued, in pertinent part, that “there [wa]s no statutory
authority nor . . . any legitimate justification for giving the BLM unbridled discretion
to search the facilities at issue at any time and without notice,” and that,
consequently, “BLM’s request for a key to any gates to conduct unannounced
inspections [wa]s violative of Maralex’s constitutionally guaranteed protection
against unreasonable searches under the Fourth Amendment.” Id. at 102. Plaintiffs
further argued that “there [wa]s no statutory support for warrantless, unannounced
11
inspections of [the] Fee Tracts,” and thus the BLM could not “rely on” its own
regulations “for conducting unannounced, warrantless searches of the sites at issue.”
Id. at 107–08. Plaintiffs also argued that “Paragraph 13” of the CA “does not provide
the BLM with the unlimited right to conduct inspections without advance notice nor
does it form the basis for giving the BLM a key to have unlimited physical access to
the wells and related facilities on Fee Tracts, which is applicable only to Federal and
Indian lease sites.” Id. at 112. Lastly, the plaintiffs challenged the State Director’s
rejection of “the O’Hare’s [sic] assertion that forcing them to supply the BLM with a
key to a lock to allow the BLM to have physical access to their surface property for
unannounced inspections of Maralex’s wells and related facilities located on the
O’Hare’s [sic] surface constitute[d] an unauthorized takings under the Fifth
Amendment.” Id. at 112-13.
In our view, it is a close question whether plaintiffs presented their argument
to the IBLA that BLM exceeded its statutory and regulatory authority by requiring a
key or lock in the INCs. On the one hand, plaintiffs clearly argued, as part of their
Fourth Amendment challenge, that the BLM lacked both statutory and regulatory
authority to impose the key/lock requirement. On the other hand, plaintiffs expressly
asserted before the IBLA that it lacked authority to address their Fourth Amendment
challenge and they asked the IBLA not to consider it.
Even assuming, however, that plaintiffs failed to properly present to the IBLA
their argument that the key/lock requirement exceeded the BLM’s statutory and
regulatory authority, we nevertheless choose to exercise our discretion to address that
12
issue.3 See U.S. Nat’l Bank of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S.
439, 447–48 (1993) (discussing authority of appellate court to address potentially
waived issue). We have held, albeit in a slightly different context, that we may
depart from general waiver principles “particularly when we are presented with a
strictly legal question, the proper resolution of which is beyond doubt or when
manifest injustice would otherwise result.” Daigle v. Shell Oil Co., 972 F.2d 1527,
1539 (10th Cir. 1992). Further, in considering whether to address an alternative
theory, we take into account (1) “whether the ground was fully briefed and argued
here and below,” (2) “whether the parties have had a fair opportunity to develop the
factual record,” and (3) “whether, in light of factual findings to which we defer or
uncontested facts, our decision would involve only questions of law.” Elkins v.
Comfort, 392 F.3d 1159, 1162 (10th Cir. 2004) (citations omitted).
In this case, the issue of the BLM’s statutory and regulatory authority has been
fully briefed and argued in this court by both sides. Further, the factual record is
essentially undisputed and, thus, we are presented with only a question of law.
Lastly, and perhaps most importantly, the BLM has indicated its intention to enforce
the key/lock requirement at the conclusion of this litigation. On October 22, 2018,
3
We are not aware of, nor has the BLM cited to, any authority holding that
preservation of the issue before the IBLA is a jurisdictional prerequisite. See Air
Courier Conference of Am. v. Am. Postal Workers Union AFL-CIO, 498 U.S. 517,
523 n.3 (1991) (“The judicial review provisions of the APA are not jurisdictional . . .
.”); Chissoe v. Zinke, 725 F. App’x 614, 621 (10th Cir. 2018) (stating that “judicial
exhaustion requirements under the APA are prudential only.”); Vietnam Veterans of
Am. v. Shinseki, 599 F.3d 654, 661 (D.C. Cir. 2010) (“We think the proposition that
the review provisions of the APA are not jurisdictional is now firmly established.”).
13
we issued an order to show cause directing the parties to address, in pertinent part,
the question of whether the BLM was continuing to require Maralex to provide the
BLM with a key to the lock on the O’Hares’ gate or to allow the BLM to place its
own lock on the gate. On December 18, 2018, defendants responded that, indeed,
“BLM continues to require Maralex to either provide the agency with a key to the
lock on the O’Hares’ gate or allow BLM to place its own lock on the gate.” Aple.
Resp. to Order to Show Cause at 2. Defendants asserted that, “[i]n the absence of
compliance with the [key/lock requirement] in the INCs, Mr. O’Hare may refuse
BLM access to the wells at any time, as he did in February 2013 (which led to BLM’s
issuance of the INCs).” Id. at 3. Thus, despite the fact that the INCs were issued
nearly six years ago, it is clear that the BLM intends to enforce the key/lock
requirement once this litigation ends. For this reason, we conclude that the interests
of justice are best served if we address the merits of plaintiffs’ argument that BLM
lacks statutory and regulatory authority to impose the key/lock requirement.
Does the BLM have authority to require a landowner or operator
to provide the BLM with keys to the landowner’s locked gates or allow
the BLM to place its own locks on the landowner’s gates?
We now turn to the merits of plaintiffs’ argument. Plaintiffs assert that, even
assuming some statutory or regulatory authority exists for the BLM to conduct
inspections on fee lands without advanced notice, “there are limits to such
inspections.” Aplt. Br. at 40. Plaintiffs point to the language of 30 U.S.C. § 1718 to
support their position. Section 1718, plaintiffs note, “limits the right to enter upon,
travel across and inspect lease sites to not only ‘authorized’ representatives of the
14
Secretary, but to representatives that are ‘properly identified.’” Id. And, plaintiffs
argue, “[b]ecause the landowner and the operator have the right to ensure that the
representative is properly identified, the BLM cannot force either the landowner or
the operator to provide a key to the landowner’s locked gates or be forced to allow
the BLM to place a lock on the landowner’s locked gates since by doing so neither
the landowner nor operator will be able to check the identification of the person(s)
entering upon, travelling across, and/or inspecting the facilities.” Id. at 40-41.
Lastly, plaintiffs argue that “[a]ll that is required of the operator under Section
1718(b) is to provide ‘immediate access to secured facilities’ to a properly identified
representative of the Secretary.” Id. at 41. This means, plaintiffs argue, that “if the
operator is on site at the time of the inspection, it is required to open any gates or
otherwise secured facilities” and “[i]f the operator is not on the lease site when the
authorized, properly identified representative arrives at the lease site, then the
operator is required to go to the lease site and provide immediate access.” Id.
Defendants argue, in response, that “the INCs’ corrective action requiring
Plaintiffs to provide BLM with key or lock access is permissible under the statute and
the regulations.” Aple. Br. at 39. In particular, defendants assert that “FOGRMA
and its implementing regulations provide that any person who fails to allow
authorized inspections is liable for penalties, which may not be applied if the liable
person takes the prescribed corrective action within the required timeframe.” Id.
a) Standard of review
15
Although this is an appeal from the district court’s decision, we accord no
particular deference to that decision. Instead, we conduct our own independent
review of the agency’s decision. Exxon Mobil Oil Corp. v. Norton, 346 F.3d 1244,
1248 (10th Cir. 2003). Under the Administrative Procedures Act, we will “set aside
agency’s action if it is arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” Utah Envtl. Cong. v. Bosworth, 439 F.3d 1184, 1188 (10th
Cir. 2006) (internal quotations omitted); see 5 U.S.C. § 706(2)(A).
When reviewing an agency’s interpretation of a statute it administers, we first
determine whether Congress has directly spoken to the precise issue. See Chevron,
U.S.A., Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 842 (1984); Cliffs Synfuel
Corp. v. Norton, 291 F.3d 1250, 1257 (10th Cir. 2002). “If the intent of Congress is
clear, that is the end of the matter; for the court . . . must give effect to the
unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842–43. If,
however, the statute is silent or ambiguous on the issue in question, we do not impose
our own construction on the statute, but rather ascertain whether the agency’s
interpretation is a permissible construction of the statute. Id. at 843. If it is, we defer
to that interpretation. Id. at 844. Our review of federal regulations is similar. “In the
usual course, when an agency is authorized by Congress to issue regulations and
promulgates a regulation interpreting a statute it enforces, the interpretation receives
deference if the statute is ambiguous and if the agency’s interpretation is reasonable.”
Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117, 2124 (2016). “This principle is
implemented by the two-step analysis set forth in Chevron.” Id. “At the first step, a
16
court must determine whether Congress has ‘directly spoken to the precise question
at issue.” Encino, 136 S. Ct. at 2124 (quoting Chevron, 467 U.S. at 842). “If the
intent of Congress is clear, that is the end of the matter; for the court, as well as the
agency, must give effect to the unambiguously expressed intent of Congress.”4
Chevron, 467 U.S. at 842-43. “If not, then at the second step the court must defer to
the agency’s interpretation if it is ‘reasonable.’” Encino, 136 S. Ct. at 2125 (quoting
Chevron, 467 U.S. at 844). “It is well established that an agency’s interpretation
need not be the only possible reading of a regulation—or even the best one—to
prevail.” Decker v. Nw. Envtl. Def. Ctr., 568 U.S. 597, 613 (2013). “When an
agency interprets its own regulation, the Court, as a general rule, defers to it unless
that interpretation is plainly erroneous or inconsistent with the regulation.” Id.
(quotation marks omitted).
b) Analysis
We begin our analysis by briefly examining the overall statutory and
regulatory scheme for inspections of oil and gas lease sites that implicate Indian
4
At the first step of the Chevron analysis, “we must giv[e] all undefined terms
their ordinary meaning.’” Nat’l Credit Union Admin. Bd. v. Nomura Home Equity
Loan, Inc., 764 F.3d 1199, 1227 (10th Cir. 2014) (quoting Fed. Hous. Fin. Agency v.
UBS Americas Inc., 712 F.3d 136, 141 (2d Cir. 2013)). “We may consult a
dictionary to determine the plain meaning of a term” and may “also take into account
the broader context of the statute as a whole when ascertaining the meaning of a
particular provision.” Conrad v. Phone Directories Co., 585 F.3d 1376, 1381 (10th
Cir. 2009) (quotation marks and citation omitted).
17
mineral interests. In § 1702 of FOGRMA, Congress set forth the following
definitions that are relevant to understanding the substantive provisions of the Act:
(1) “Federal land” means all land and interests in land owned by the
United States which are subject to the mineral leasing laws, including
mineral resources or mineral estates reserved to the United States in the
conveyance of a surface or nonmineral estate;
···
(3) “Indian lands” means any lands or interest in lands of an Indian tribe
or an Indian allottee held in trust by the United States or which is
subject to Federal restriction against alienation or which is administered
by the United States pursuant to section 14(g) of Public Law 92-203 [43
USC § 1613(g)], as amended, including mineral resources and mineral
estates reserved to an Indian tribe or an Indian allottee in the
conveyance of a surface or nonmineral estate, except that such term
does not include any lands subject to the provisions of section 3 of the
Act of June 28, 1906 (34 Stat. 539) [unclassified];
···
(5) “lease” means any contract, profit-share arrangement, joint venture,
or other agreement issued or approved by the United States under a
mineral leasing law that authorizes exploration for, extraction of, or
removal of oil or gas;
(6) “lease site” means any lands or submerged lands, including the
surface of a severed mineral estate, on which exploration for, or
extraction or removal of, oil or gas is authorized pursuant to a lease;
···
30 U.S.C. § 1702(1), (3), (5), (6).
In our view, the plain language of the statutory definition of “lease” includes
communitization agreements approved by the United States, such as the one at issue
in this case. More specifically, a communitization agreement is a “contract” or
“other agreement” that, depending upon the circumstances, has been “approved by
the United States under a mineral leasing law,” i.e., federal law governing mineral
rights on Indian and trust land, “that authorizes exploration for, extraction of, or
18
removal of oil or gas.”5 Thus, the statutory definition of “lease site” necessarily
includes any lands, including privately-owned lands, on which exploration for and
extraction of oil and gas is occurring pursuant to a communitization agreement.
Section 1718 of FOGRMA, entitled “Inspection,” provides in pertinent part as
follows:
(b) Inspection of lease sites for compliance with mineral leasing laws
and 30 USCS §§ 1701 et seq. Authorized and properly identified
representatives of the Secretary may without advance notice, enter upon,
travel across and inspect lease sites on Federal or Indian lands and may
obtain from the operator immediate access to secured facilities on such
lease sites, for the purpose of making any inspection or investigation for
determining whether there is compliance with the requirements of the
mineral leasing laws and this Act. The Secretary shall develop
guidelines setting forth the coverage and the frequency of such
inspections.
30 U.S.C. §1718(b). Although § 1718(b) incorporates the statutory phrase “lease
sites,” it proceeds to limit the scope of that phrase by authorizing BLM
representatives to, “without advance notice, enter upon, travel across and inspect”
lease sites that exist “on Federal or Indian lands,” i.e., non-fee lands owned by the
United States or held in trust by the United States for a tribe, and that arise out of
5
Neither the IBLA nor the BLM have expressly adopted this broad definition
of “lease.” Instead, the IBLA interpreted the identically-worded regulatory definition
of the term “lease site” to include more than “Federal or Indian lease sites,” and also
concluded that the identically-worded regulatory definition of the term “lease” was
not incorporated into the regulatory phrase “lease site.” Aplt. App. at 170, 174. We
reject this latter conclusion as inconsistent with the statutory language and normal
rules of statutory construction. In particular, “it is a normal rule of statutory
construction that identical words used in different parts of the same act are intended
to have the same meaning,” and we see no evidence that Congress intended for the
term “lease,” as used in the term “lease site,” to carry a different meaning. Pereira v.
Sessions, 138 S. Ct. 2105, 2115 (2018).
19
contracts or agreements issued or approved by the United States. Further, the statute
is silent with respect to how, if at all, BLM representatives may access lease sites on
privately-owned lands.
Defendants concede that “Congress did not expressly address the application
of Section 1718(b) inspection authority to fee lands committed to communitization
agreements.” Aple. Br. at 15. But, defendants argue, “[g]iven that ambiguity, BLM
reasonably exercised its delegated rulemaking authority to include the inspection of
fee lands that, like the O’Hares’, are subject to a communitization agreement that was
approved by the Department and involves Indian lands where the affected tribe shares
in the production and royalties of the oil and gas operation.” Id.
Defendants’ arguments hinge on the threshold question of whether § 1718(b) is
ambiguous or not. A statute is “ambiguous if it is reasonably susceptible to more
than one interpretation or capable of being understood in two or more possible senses
or ways.” Nat’l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 764
F.3d 1199, 1226 (10th Cir. 2014) (quotations and citations omitted); see Chickasaw
Nation v. United States, 534 U.S. 84, 90 (2001). Although it may be reasonable from
a policy standpoint for the BLM to have authority to inspect fee lands that are subject
to a communitization agreement approved by the United States, § 1718(b) simply is
not ambiguous and thus does not provide the BLM with any authority to exercise its
delegated rulemaking authority on that issue. As noted, § 1718(b) quite clearly limits
the BLM’s inspection authority to lease sites on federal and Indian lands.
20
To be sure, § 1718(b) is silent with respect to inspections of lease sites on fee
lands, but that silence does not render the statute ambiguous. See Spring Creek Expl.
& Prod. Co. v. Hess Bakken Inv., II, LLC, 887 F.3d 1003, 1018 (10th Cir. 2018)
(“silence is not ambiguity”). When the Supreme Court has discussed the exercise of
agency discretion “‘in the interstices created by statutory silence,’” it has done so
only when “considering undefined terms in a statute or statutory directive to perform
a specific task without giving detailed instructions.” Marlow v. New Food Guy, Inc.,
861 F.3d 1157, 1162 (10th Cir. 2017) (quoting Util. Air Regulatory Grp. v. EPA, 134
S. Ct. 2427, 2445 (2014) (internal quotation marks omitted)). And that is simply not
the case with § 1718(b). As noted, § 1718(b) plainly focuses on lease sites “on
Federal or Indian lands” and does not otherwise leave any terms or statutory
directives undefined.
For these reasons then, we conclude that § 1718(b) does not afford the BLM
with authority to inspect lease sites on privately-owned lands. Thus, we must look
elsewhere to determine whether any authority exists for the BLM’s proposed
inspections of the wells in this case.
The Secretary has issued regulations implementing the various statutory
directives outlined by Congress in FOGRMA. To begin with, 43 C.F.R. § 3161.1(b)
states:
The regulations in this part and 43 CFR part 3170, including subparts
3173, 3174, and 3175, relating to site security, measurement of oil and
gas, reporting of production and operations, and assessments or
penalties for non-compliance with such requirements, are applicable to
all wells and facilities on State or privately owned lands committed to a
21
unit or communitization agreement, which include Federal or Indian
lease interests, notwithstanding any provision of a unit or
communitization agreement to the contrary.
43 C.F.R. § 3161.1(b) (emphasis added).
In turn, 43 C.F.R. § 3161.3, entitled “Inspections,” states:
(a) The authorized officer shall establish procedures to ensure that each
Federal and Indian lease site which is producing or is expected to
produce significant quantities of oil or gas in any year or which has a
history of noncompliance with applicable provisions of law or
regulations, lease terms, orders or directives shall be inspected at least
once annually. Similarly, each lease site on non-Federal or non-Indian
lands subject to a formal agreement such as a unit or communitization
agreement which has been approved by the Department of the Interior
and in which the United States or the Indian lessors share in production
shall be inspected annually whenever any of the foregoing criteria are
applicable.
(b) In accomplishing the inspections, the authorized officer may utilize
Bureau personnel, may enter into cooperative agreements with States or
Indian Tribes, may delegate the inspection authority to any State, or
may contract with any non-Federal Government entities. Any
cooperative agreement, delegation or contractual arrangement shall not
be effective without concurrence of the Secretary and shall include
applicable provisions of the Federal Oil and Gas Royalty Management
Act.
43 C.F.R. § 3163.3(a) and (b).6
Lastly, 43 C.F.R. § 3162.1, which discusses “General requirements” for
operating rights owners and operators, states:
(a) The operating rights owner or operator, as appropriate, shall comply
with applicable laws and regulations; with the lease terms, Onshore Oil
6
The Secretary’s authority to enact the portion of this regulation concerning
inspections on privately-owned lands arises both from the general purposes
provisions of FOGRMA, § 1701(b)(3)-(5), as well as § 1711(a) and (b). Section
1711(a) directs the Secretary, in part, to “establish a comprehensive inspection . . .
system,” and §1711(b) directs the Secretary to conduct annual inspections of certain
lease sites, without limitation to sites contained on Federal or Indian lands.
22
and Gas Orders, NTL’s; and with other orders and instructions of the
authorized officer. These include, but are not limited to, conducting all
operations in a manner which ensures the proper handling,
measurement, disposition, and site security of leasehold production;
which protects other natural resources and environmental quality; which
protects life and property; and which results in maximum ultimate
economic recovery of oil and gas with minimum waste and with
minimum adverse effect on ultimate recovery of other mineral
resources.
(b) The operator shall permit properly identified authorized
representatives to enter upon, travel across and inspect lease sites and
records normally kept on the lease pertinent thereto without advance
notice. Inspections normally will be conducted during those hours when
responsible persons are expected to be present at the operation being
inspected. Such permission shall include access to secured facilities on
such lease sites for the purpose of making any inspection or
investigation for determining whether there is compliance with the
mineral leasing laws, the regulations in this part, and any applicable
orders, notices or directives.
(c) For the purpose of making any inspection or investigation, the
Secretary or his authorized representative shall have the same right to
enter upon or travel across any lease site as the operator has acquired
by purchase, condemnation or otherwise.
43 C.F.R. § 3162.1 (emphasis added).7
The regulatory provisions thus provide for an inspection framework that
applies to federal, Indian, and certain privately-owned lands, but that, not
surprisingly, provides the BLM with greater inspection authority over federal and
Indian lands than privately-owned lands. With respect to lease sites on federal and
Indian land that are “producing or . . . expected to produce significant quantities of
oil or gas in a year or which ha[ve] a history of noncompliance with applicable
7
It was this regulation that Maralex was cited for violating in the four INCs.
Aplt. App. at 168.
23
provisions of law or regulations,” BLM representatives must inspect such lease sites
“at least once annually.” 43 C.F.R. § 3161.3(a). As for lease sites on privately-
owned lands that are committed to a unit or communitization agreement that has been
approved by the Department of the Interior, they are required to “be inspected
annually whenever” they are “producing or . . . expected to produce significant
quantities of oil or gas in any year or” if they “ha[ve] a history of noncompliance
with applicable provisions of law or regulations.”8 43 C.F.R. § 3161.3(a). They can
also be inspected by the BLM for purposes of assessing “site security, measurement,
reporting of production and operations, and assessments or penalties for
noncompliance with such requirements.” 43 C.F.R. § 3161.2. Further, the operating
rights owner or operator of any such lease site on privately-owned land is required to
“permit properly identified authorized representatives” of the BLM “to enter upon,
travel across and inspect lease sites and records normally kept on the lease pertinent
thereto without advance notice.” 43 C.F.R. § 3162.1(b). Any such inspections,
however, must normally “be conducted during those hours when responsible persons
are expected to be present at the operation being inspected.” Id. In addition, “[s]uch
permission” by the operating rights owner or operator “shall include access to
secured facilities on such lease sites for the purpose of making any inspection or
investigation for determining whether there is compliance with the mineral leasing
8
In this case, the IBLA expressly found that the wells at issue “are producing
or expected to produce significant quantities of oil and gas,” thus rendering the wells
subject to annual inspection under § 3163.3(a). Aplt. App. at 172.
24
laws, the regulations . . . , and any applicable orders, notices or directives.” Id.
Lastly, BLM representatives are, “for the purpose of making any inspection or
investigation,” afforded the same right of entry to and travel access across the lease
site “as the operator has acquired by purchase, condemnation or otherwise.” Id. §
3162.1(c).
Thus, at least for purposes of this case, the key difference between lease sites
on federal/Indian lands and lease sites on privately-owned land subject to a
communitization agreement is how BLM representatives may access them. For lease
sites on federal/Indian lands, BLM representatives have the right to enter those sites
by themselves without first seeking permission from the operating rights owner or
operator. In contrast, for lease sites on privately-owned lands, BLM representatives
may not independently enter the sites, but instead must seek entry (but do not have to
give advance notice) from the operating rights owner or operator and the operating
rights owner or operator, as noted, is obligated to allow such entry.
As for how often BLM representatives may inspect the wells, the regulations
contain no limitation. Indeed, the only reference to frequency of inspections is
contained in § 3161.3(a), which, as noted, requires lease sites meeting certain
requirements to be inspected at least once annually. Section 3161.3(a) does not,
however, impose any upper limit on the number of inspections. In other words, as
both the State Director and the IBLA concluded in their respective decisions, “[t]he
[regulatory] wording ‘inspected annually’ is a minimum standard not a maximum
limitation.” Aplt. App. at 90; see id. at 176 n.10 (IBLA decision).
25
In sum, the BLM had authority to inspect the wells at issue. The question
remains, however, whether BLM had authority to require Maralex to provide BLM
with “a key to access the location or” allow BLM to install its own locks. Aplt. App.
at 24).
We agree with plaintiffs that the BLM lacks authority to require an operator or
landowner to provide the BLM with a key to the landowner’s locked gates or to allow
the BLM to place its own locks on the landowner’s locked gates. But we arrive at
this conclusion in a different manner than suggested by plaintiffs. Although
plaintiffs base many of their arguments on the language of § 1718(b), that statutory
subsection, as discussed above, does not apply at all to lease sites on privately-owned
lands. Instead, the parameters of inspections of lease sites on privately-owned lands
are outlined in two regulations: 30 C.F.R. §§ 3162.1 and 3163.3. Neither of those
regulations provide any authority for the BLM to require an operating rights owner or
operator (or, for that matter, a private landowner) to (a) provide BLM with a key to a
lease site on privately-owned land, or (b) to install a BLM-lock on the gates to such
lease site. Rather, as discussed above, the BLM has the right to conduct
unannounced inspections of such sites, but must rely on the operating rights owner or
operator to afford them entry to the lease site.
Defendants, for their part, cite in their appellate brief to the statutory and
regulatory provisions authorizing the BLM to take “corrective action.” Aple. Br. at
39 (citing 30 U.S.C. §§ 1719(a)(2)(A), (a)(2)(B) and 43 C.F.R. § 3163.1(a)(4)).
Those statutory provisions, however, speak only in terms of monetary “civil
26
penalties” (the amount of which depends upon how long the violation has gone on).
30 U.S.C. §§ 1719(a)(2), (b). The regulatory provisions also mention the possibility
of lease cancellations and criminal penalties. 43 C.F.R. §§ 3163.1(a)(5), 3163.3.
Notably, nothing in the statutory and regulatory provisions mentions the remedy
imposed on the plaintiffs in this case, i.e., requiring them to provide BLM with a key
or to allow BLM to install its own locks. Although defendants concede this point,
they nevertheless argue that “it is reasonable to conclude that when a landowner
denies BLM entry, the very least that the agency can permissibly do under the statute
is order any reasonable remedy that will yield the access required to carry out
Congress’s charge.” Id. at 39-40. We reject that argument. Requiring the provision
of a key or lock access is, without question, a drastic measure that would, at a
minimum, require express congressional approval. Because no such approval
appears in the relevant statutes or regulations, defendants’ arguments must be
rejected.
III
We REVERSE and REMAND to the district court with directions to enter
judgment in favor of plaintiffs on their claim that the BLM lacks authority to require
plaintiffs to provide the BLM with a key to access the wells at issue or to allow BLM
to install its own locks.
27