Maralex Res., Inc. v. Jewell
Maralex Res., Inc. v. Jewell
Opinion of the Court
This matter is before the Court for review of an agency action pursuant to the *979Administrative Procedure Act,
I. BACKGROUND AND PROCEDURAL HISTORY
On February 11, 2013, Gabriel Trujillo, a Bureau of Land Management ("BLM") technician, contacted Maralex Resources, Inc. ("Maralex") to announce his intention to inspect oil wells operated by Maralex. (AR at 105.) A Maralex employee told Mr. Trujillo the wells were on property belonging to Mickey O'Hare, and that she foresaw problems with obtaining access to the lease sites. (Id. ) She directed Mr. Trujillo to contact Mr. O'Hare. (Id. ) Mr. O'Hare told Mr. Trujillo that the BLM had "no rights to be on his land" to inspect the wells "because the surface and minerals were owned by him." (Id. at 44.)
After speaking with Mr. O'Hare, Mr. Trujillo and a BLM law enforcement officer attempted to inspect the wells, but were unable to do so because of a locked gate blocking access to the property. (Id. at 43-44.)
On February 26, 2013, the BLM issued four Notices of Incidents of Noncompliance ("INCs") to Maralex for refusing to permit inspection of the wells. (Id. at 13-21.) The INCs classified Maralex's violations as "minor" and did not assess any fines. (Id. at 14, 16, 18, 20.) As a corrective action, however, the INCs mandated that Maralex provide keys to the locked gates, or, alternatively, allow the BLM to place its own locks on the gates so that the BLM could access the wells. (Id. at 14-21.)
On August 13, 2013, six months after Mr. Trujillo attempted to inspect the wells, Mr. O'Hare met a BLM inspector at the gate to his property and "allowed [him] to enter and inspect the wells and facilities." (Id. at 108.)
Maralex eventually appealed the INCs to the Interior Board of Land Appeals ("IBLA"), thereby exhausting its administrative remedies. On July 10, 2015, the IBLA upheld the INCs. (Id. at 469.)
A. The Communitization Agreement
The oil wells in dispute are subject to a Communitization Agreement ("CA"). (Id. at 26.) The parties to the CA include, among others, lessee Maralex, of which Mr. O'Hare is the President, and the Southern Ute Indian Tribe ("the Tribe"). (Id. at 38-40.) The CA states that "[t]he Communitized Area shall be developed and operated as an entirety, with the understanding and agreement between the parties hereto that all Communitized Substances produced therefrom shall 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 this agreement." (Id. at 28.)
The parties recognized that their mineral interests "under the leases and lands subject to this agreement ... cannot be independently developed and operated." (Id. at 27.) They agreed to "communitize and pool their respective mineral interests in lands subject to this agreement for the purpose of developing and producing communitized substances." (Id. at 27.) The interests *980committed to the CA are treated as a single entity. (Id. at 28, 41.) The oil production is proportionally allocated among the parties based on the number of acres they each committed to the agreement. (Id. )
B. The Federal Oil and Gas Royalty Management Act
Congress enacted the Federal Oil and Gas Royalty Management Act of 1982,
FOGRMA includes guidance regarding the inspection of lease sites and the right of the Secretary to travel across sites.
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 chapter. The Secretary shall develop guidelines setting forth the coverage and the frequency of such inspections.Id. § 1718(b).
For the purpose of making any inspection or investigation under this chapter, the Secretary shall have the same right to enter upon or travel across any lease site as the lessee or operator has acquired by purchase, condemnation, or otherwise.Id. § 1718(c).
Congress further directed the Secretary to "establish procedures to ensure that authorized and properly identified representatives of the Secretary will inspect at least once annually each lease site producing or expected to produce significant quantities of oil or gas...."
II. JURISDICTION AND VENUE
Plaintiffs seek judicial review of the IBLA's decision to uphold the BLM's INCs. (Doc. # 21.) Pursuant to
Plaintiffs also claim the BLM actions in question are facially unconstitutional and unconstitutional as applied because they violate Mr. O'Hare's Fourth Amendment right to be free from unreasonable searches and seizures, and constitute a regulatory taking of his property. (Doc. # 1.)
This Court, therefore, has jurisdiction over this matter pursuant to
*981III. STANDARD OF REVIEW
The question presented by this administrative appeal is whether the IBLA's decision upholding the INCs was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. (Doc. ## 1, 25; see also
"The duty of a court reviewing agency action under the 'arbitrary or capricious' standard is to ascertain whether the agency examined the relevant data and articulated a rational connection between the facts found and the decision made." Olenhouse v. Commodity Credit Corp. ,
[A]n agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Motor Vehicle ,463 U.S. at 43 ,103 S.Ct. 2856 .
When a court is applying the arbitrary and capricious standard to ensure factual support for an agency's decision, the inquiry is equivalent to the "substantial evidence" standard. Olenhouse,
The IBLA did not rule on Plaintiffs' constitutional arguments. (AR at 486.) Accordingly, the Court will review de novo the question of whether the IBLA's decision upholding the INCs violated Plaintiffs' constitutional rights. See, e.g. , Copar Pumice Co., v. Tidwell ,
IV. ANALYSIS
Plaintiffs appeal the IBLA's July 10, 2015 decision to uphold the BLM's INCs. Specifically, Plaintiffs argue that:
(1) Neither
(2) Even if the BLM is authorized to conduct warrantless inspections,
(3) If
The Court will address each argument in turn.
*9821) FOGRMA grants BLM representatives the authority to conduct warrantless, unannounced inspections.
Plaintiffs argue FOGRMA,
In reviewing an agency's interpretation of a statute it administers-here, FOGRMA-the Court first determines "whether Congress has directly spoken to the precise question at issue." Am. Colloid Co. v. Babbitt ,
Further, a court's review of "an agency's interpretation of its own regulations is substantially deferential." Copar ,
Additionally, courts construe statutes "liberally in favor of the Indians, with ambiguous provisions interpreted to their benefit." Mont. v. Blackfeet Tribe of Indians ,
In the instant case, the IBLA found that the BLM had authority under FOGRMA to inspect wells (the Katie Eileen Wells) subject to the CA. (AR at 470-71, 478-79.) The IBLA concluded that nothing in FOGRMA "precludes BLM ... from inspecting non-Federal/non-Indian lease sites, for the purpose of determining whether oil or gas production from non-Federal/non-Indian lands is being accurately recorded and reported ... when that production is properly attributable to Federal or Indian lands, under ... communitization agreements." (AR at 478.) The IBLA reasoned that one purpose of FOGRMA is " 'to require the development of enforcement practices that ensure the prompt and proper collection and disbursement of oil and gas revenues owed to ... Indian lessors[.]' "
Plaintiffs, however, contend that "[t]he only inspections the Secretary is authorized to conduct under FOGRMA are limited to 'lease sites on Federal or Indian lands' as set forth in Section 1718(b)." (Doc. # 21 at 12.)
Although the specific inspection directive in
Here, production from the Katie Eileen Wells, leased by the O'Hares to Maralex, is allocated to the Tribe's lease, and a proportional share of royalties generated from that communitized production are owed to the Tribe. (AR at 478.) Therefore, the IBLA reasonably concluded that the governing regulations require operators of lease sites-without distinguishing between lease sites on Indian lands and fee lands subject to a communitization agreement-to permit inspection. (Id. at 480 (quoting
Further, the "right of supervision" to which Maralex agreed under the CA does not mention advance notice. (Id. at 30.) On the other hand, the guiding regulation expressly requires Maralex to allow "properly identified representatives of the Secretary" to conduct inspections "without advance notice."
The IBLA's interpretation is controlling unless it is plainly erroneous or inconsistent with the regulations. Norfolk Energy, Inc. v. Hodel ,
2) Plaintiffs waived their argument that requiring Maralex to provide the BLM with keys to its locked gates, or allowing the BLM to place its own locks, is not a statutorily permissible corrective action.
Although FOGRMA provides for civil penalties for failure to take "corrective action,"
As corrective action in the instant case, the INCs required Maralex to provide keys to the locked gates so that authorized BLM representative could access the wells, or, alternatively, to place the BLM's own locks on the gates. (AR at 14-21; Doc. # 21 at 2.)
Plaintiffs argue that
Plaintiffs, however, did not present to the IBLA this particular argument that the BLM's corrective action exceeded its authority. "Simple fairness to those who are engaged in the tasks of administration, and to litigants, requires as a general rule that courts should not topple over administrative decisions unless *984the administrative body not only has erred but has erred against objection made at the time appropriate under its practice." United States v. L.A. Tucker Truck Lines, Inc. ,
3) The BLM's access does not violate O'Hares' right to be free from unreasonable searches and seizure, as guaranteed by the Fourth Amendment.
Plaintiffs argue that allowing the BLM to access the O'Hares' fee lands at any time, and without any limitation or search warrant, violates the O'Hares' rights to be free from unreasonable searches and seizures rights. (Doc. # 21 at 18.)
Plaintiffs conflate the inspection limits in
In leasing their interests to Maralex, the O'Hares gave Maralex the right to enter their property as reasonably necessary to develop the mineral estate. See Entek GRB, LLC v. Stull Ranches, LLC ,
The IBLA recognized that the BLM's authority to inspect wells on the O'Hares' land subject to the CA was limited to " 'site security, measurement, reporting of production and operations, and assessments or penalties for noncompliance with such requirements.' " (AR at 479 (quoting
Further, the record does not show the BLM seeks, or has been granted by the IBLA, the authority to inspect the Katie Eileen Wells other than in accordance with the regulations. The regulations expressly state that "[i]nspections normally will be conducted during those hours when responsible persons are expected to be present at the operation being inspected."
Moreover, a party can contract away its privacy rights. See, e.g. , Zap v. United States ,
Therefore, assuming that the corrective action is permissible, as long as the BLM's inspection-after obtaining keys or placing its own locks-is limited to the conditions imposed by the CA and applicable regulations, including
4) The BLM's authority to conduct searches does not constitute a physical taking of Plaintiffs' property.
Plaintiffs argue that if they are forced to turn over keys to the BLM, or to allow the BLM to install its own locks, they will be unable to exclude unauthorized or unidentified persons from accessing the wells on their property. (Doc # 1 at 2.) They suggest this constitutes a regulatory taking of their property. (Doc ## 1 at 2, 21 at 23-24.)
In order to establish a regulatory taking claim, Plaintiffs need to show "a permanent physical invasion of private property," deprivation of "all economically beneficial use of the property," or a taking based on the "magnitude of the economic impact ... and the extent of the regulation's interference with property rights." Alto Eldorado P'ship v. Cty. of Santa Fe ,
Further, Plaintiffs' claim regarding regulatory taking is not ripe. They have not sought any compensation for the alleged taking. See Williamson Cty. Reg'l Planning Comm'n v. Hamilton Bank ,
V. CONCLUSION
The Court holds that the IBLA's finding that FOGRMA grants the BLM representatives warrantless, unannounced authority to inspect the wells on Plaintiffs' fee lands was not arbitrary, capricious, or otherwise contrary to law.
Further, as long as the scope of the BLM's inspection does not exceed the conditions outlined in the CA and applicable regulations, the BLM's access to the O'Hares' fee lands without notice or a search warrant does not violate their right to be free from unreasonable searches and seizure, as guaranteed by the Fourth Amendment.
The Court declines to consider if requiring Plaintiffs to provide the BLM with keys, or allowing the BLM to place its own locks on the O'Hares' gates, falls within the statutorily permitted corrective action because Plaintiffs waived this argument before the IBLA.
Reference
- Full Case Name
- MARALEX RESOURCES, INC., a Colorado corporation, Alexis M. O'Hare, and Mary C. O'Hare v. Sally JEWELL, in her official capacity as Secretary of the United States Department of the Interior, The United States Department of the Interior, and the United States of America
- Status
- Published