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Home My WebLink About176-012_BLM United States Department of the Interior GEOLOGICAL SURVEY RESTON, VA. 22092 In Reply Refer To: EGS-l1ail Stop 650 OCT 1 £5 1981 Hemor and urn To: Deputy Conservation pÍia.l1ager--Onshore Field Op~rations Anchorage, Alaska FrotH: Chiù.f t Branch of Rules an.d Procedures Onshore Minerals Regulation Subje(~t: C~ppe;- Va,l.~ey_ ì';¿~~t~i~e",JJojrk~1J "r~~S., v. A:ru1.ru~ Pursuant to your request to Gerry R. Daniels, attached. 1s a copy of subject caset together with a memorandum of August 13, 1981. from. the Assistant Solicitor, Branch of Onshore Minerals, pertaining to the decision. Charles L. Sours 2 Attachments cc: CD File ~FM, G. Daniels Desk File (CLS) EGS:CD:CLSours:mh:lO/14/81:860-6259:Disk #4 · " UNITED STATES DEPARTMENT OF THE INTERIOR OFFICE OF THE SOLICITOR WASHINGTON. DC 20240 AUG 1 3 1981 Memorandum To: Deputy Division Chief, Onshore Minerals Regulation Conservation Division, Geological Survey From: Assistant Solicitor, Branch of Onshore Minerals Subject: Instruction Memorandum Re: Copper Valley Machine Works v. Andrus, No. 79-1994 (D.C. Cir.) We have reviewed the proposed instruction memorandum (attached) which would transmit copies of the captioned case to Regional Conservation Managers. We suggest more detailed guidance from your office may be useful in assuring uniformity of understand- ing and action on the part of field personnel. We recommend that.yo~r instruction memorandum contain the following: 1. A statement of what the court did. The Circuit Court did several positive things: (a) it confirmed the Department's construction of the term "conservation" in 30 V.S.C. § 209 as including conservation of nonmineral resources: and (b) it confirmed the Secretary's power to condition activity on a mineral lease at the permit approval stage. The court held that where permit approval conditioned such use by prohibiting access for certain periods of time, that the provisions of 30 V.S.C. § 209 required a corresponding "extension" of the lease term. 2. A statement of what actions field personnel are to take. For example, if a lease is to expire December 31, but surface access was conditioned by permit approval for the period of September 1 through November 31, how should the field advise a lessee as to when drilling should take place in order to obtain a two-year extension. Your field personnel should know that drilling would have to occur at the end ,of the three month extension to the lease term caused by the suspension (i.e., end of March). - ~ -2- Similarly, do you want your field personnel to issue a notice of suspension concurrent with the approval of an access-con- ditioned permit to drill? 3. A statement (similar to the third paragraph of your draft memorandum) that no automatic suspension is to be granted where the condition on access is included as a lease term. We arrive at this conclusion based on the fact that the court ruled that where access was denied for an unstipulated lease, it constituted a suspension. The court supported that con- clusion by reference to Texaco, Inc., 68 I.D. 194 (1976), a case involving a stipulated lease. However, the Department's holding in Texaco was that the Secretary was not deprived of his discretion to grant a suspension under section 39 of the Mineral Leasing Act, 30 D.S.C. § 209, by the inclusion of a stipulation that arguably put the lessee on notice that deve- lopment might not be allowed. The D.C. Circuit Court of Appeals uses Texaco to hold that pro- hibition of access at the time of permit approval was tanta- mount to a suspension of Copper Valley's lease. The Department in Texaco, however, only held that the inclusion of development stipulations does not deprive the Secretary of his discretion to grant suspensions. We therefore believe the imposition of express access limitation or less-than-full development stipu- lations in the lease itself at time of issuance does not con- stitute an automatic suspension when the stipulated power is exercised in the supervision of operations. Any broader lan- guage in the Court of Appeals' decision is dictum not related to the facts of Copper Valley's case. Indeed, this is the im- plicit holding and was the express basis for our argument in Mattis v. Andrus, 636 F.2d 1227 (9th Cir. 1980), cert. denied, 101 S. Ct. 2321 (1981), in which the District Court and Ninth Circuit Court of Appeals did not interfere with GS's denial of a suspension of a lease on which operations had been disap- proved because the plan did not satisfy the express condor protection stipulations in the lease. In conclusion, we continue to be of the opinion that the im- position of stipulations which may limit or preclude develop- ment are within the ambit of the Secretary's authority under the various leasing laws. We feel the court in this case sustains the use of that authority. Such stipulations, where expressly imposed at time of lease issuance, do not preclude , . \.. \. -3- nor require (by themselves) the exercise of suspension authority pursuant to section 39 of the Mineral Leasing Act. ~~c~~~ Assistant Solicitor, Onshore Minerals Division of Energy and Resources cc: Bureau of Land Management (530) Dept. of Agriculture, General Counsel's Office Attn: Susie Bailey '-'. _...~~ '.4!f.:.Jt. ~~ f"\. i -... ~.t__"'. ___ .................~,...,;'.J____.....,>J_ ".....1." .....-4...................... _. ~...... .,__~..;....,__ "'..._~4t_.....__.._ . . . . ..... .. - . Notice: Thi~ opinion i~ suh.i"'ct to formall"t'vi:,ion hf'fore pul.hl"ati(¡n ir. ~~.:. Federal R(·porter or U.S.App.D.C. Report:--.. C:,prs arE.> )"l·,¡tl(:';!cd tl) n.<.... the Clerk of any formal ('!Tors in order that cutTt'clions mi1)' ho:· rr.ad':." b·::;.~", the bound volumes go tu pre:'s. :1 J .' ~ltit£b ~atc5 <GOltrt of J\ppi'~tI5 FOR THE DISTRICT OF COLVi\lBIA CIRCl~IT , J ) r No. 79-1994 COPPER VALLEY MACHINE \-VORKS, I:,c., APPELLANT v. CECIL D. ANDRUS, SECRETARY OF THE DEPARTMENT OF INTERIOR, et at. Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 78-1572) ~. - - - - -_. . Argued September 17, 1980 . ,. ~~:.. "~.." -~~.. ~1 Decided April 23, 1981 - .___ u_. Everard A. Marseglia, Jr. for appellant. A. Karen Hi!! was on the brief, for appellant. Jerry Jackson, Attorney, Department of Justice with whom James W. Moor'man, Assistant Attorney GeneraL Lawrence R. Liebesman and Edu)ard J. Shau.'uker, Attor- Bills of co:,ts must be filed within 14 days after entry of judg-ment. The cú1;;: looks with disfavor upon motions to file bills of costs out of tim{'. ....~ - ~.... ~ _.~............-....,..... - _ .. _...·~r_ -~"""'''''''''''''II _--_~......__~ ~~ ...~\'-....-..- ...._~...."........,.... ~~-".-"t~.. . ...._ _.__ _...._ . _ ....._.... -.. . \.-. . _"._ "~.I.~ __. "~--"~ _~-x.-Þt____ _"....................__ .............. ........._......._ .... ...._....._...._...~.__.....,... 2 neys, Department of Justice were on the brief, for appel- lees. . Before: T AMM and MACKINNON, Circuit Judges and PRATT*, [Tnited States District Judge for the District of Columbia Opinion for the Court filed by Circuit Judge MACKINNON Concurring opinion filed by District Judge Pratt. MACKINNON, Circuit Judge. The principal issue in this appeal is whether a restriction in a drilling permit pro- hibiting summer drilling in the interest of conservation worked a "suspension of operations and production" that would extend the life of an oil and gas lease under section 39 of the Mineral Leasing Act of 1920, as amended, 30 U.S.C. § 209. -\ 1. BACKGROUND Effective February 1, 1966, the Secretary of Interior is- sued oil and gas lease A-063937 to run for an initial "period of ten years and so long thereafter as oil or gas is produced in paying quantities." (Appellant's Exhibit (App. Ex.) A at 3.) N ear the end of the primary lease term, Copper Valley Machine Works, Inc. (Copper Valley), the designated operator of the lease, 1 asked the Oil and Gas Supervisor of the United States Geological Survey about "extending the * Sitting by designation pursuant to 28 U.S.C. § 292(a). I Although Copper Valley is not the actual lessee we shall refer to it as such hereafter for convenience. The distinction be- tween a designated operator and a lessee is inconsequential for the purposes of this opinion. -.:.... .---............-... --- I'!P' - -,,~........I".~----_.~--~~..............-...... ................ _"".-.....~ ~_ ......._..þ... __ ._ .._____..........~~~~~ ~_...,.. ,,__. ......-~ co '- . --~~........__."",. ~ - --- ..... .~- ...--..... . .~~"'~_""*_~"'_."'_. o· _ _._ . _.a---...,.", _, ..... _ _. ~_~Ac:.,o. .._ .'. _ _'4 ._..__._..._ _ . - ..., --- ------ 3 10-year lease term by drilling across the expiration date." 2 Subsequently Copper Valley filed for the Supervisor'~ consideration an application for a permit to drill. On January 30, 1976 the drilling permit application was approved, subject to conditions attached to the permit and con- ditions and requirements described below: * * .. * * 10. The approved application and development plan provides for operation during the u'inter season 0 n l y. as approved by the appropriate surface managing agency. CAppo Ex. F at 2) (emphasis added). This "winter season only" restriction was considered "necessary because the lease itself was issued without any stipulations for protec- tion of the tundra/perma-frost environment during the months of summer tha\v." (App. Ex. V at 3.) "' , A. Subsequent History The events that then led to this dispute are described in a memorandum from the Acting Director of the Geological Survey to the Secretary of Interior: The well was commenced on January 31, 1976 (the expiration date of the primary term), and reached a depth of 100 feet before having to shutdown for the 1976 summer season. Following the summer shut- down from May to November 1976, operations were 2 Memorandum from Acting Director, United States Geologi- cal Service to Secretary of Interior (March 30, 1978), }'eprillted in Appellant's Exhibit (App. Ex.) V at 2 (hereafter cited to App. Ex. only). The primary term of a lease is extended for two years upon a finding of diligent drilling on the lease prior to and at the lease's expiration. See 43 C.F.R. § 3107.2-3 (quoted at note 3 infra). .. --~-""""'.,: ",;:-~.-r......-- ___.-.,....'_".~. __ < __. ....,'.:-.__ ,-............ ,"...__ ~ .1- ~~~ ........... _ - ~~---......~...-____..._- . '-. ..' 4 ". recommenced on February 5, 1977, and after reaching a depth of 1,070 feet on March 20, 1977, electric logs were run in the well. After evaluating the electric logs and examining the samples, the Supervisor con- cluded that the operator had satisfied the "diligent drilling" requirements of 43 CFR 3107.2-3,3 and rec- ommended to BLM that the lease be extended to January 31, 1978. After the 1977 summer shutdown, the Supervisor ad- vised the operator and the lessee that the lease would expire January 31, 1978, absent a well physically and mechanically capable of production in paying quan- tities by that date. On January 20, 1978, the operator wrote the Super- vîsor and requested that the lease be extended for twelve (12) months to compensate for the two periods of summer shutdown in 1976 and 1977. The Super- visor considered this letter to be an application to the Secretary for an extension of lease Anchorage 063937 pursuant to 43 CFR 3103.3-8[4] [Emphasis added.] 1 j j J 1 ¡ . .~ 343 C.F.R. § 3107.2-3. Period of extension. Any lease on which actual drilling operations, or for which under an approved cooperative or unit plan of de- velopment or operation, actual drilling operations were commenced prior to the end of its primary term and are being diligently prosecuted at that time, shall be extended for 2 years and so long thereafter as oil or gas is produced in paying quantities. (Emphasis added.) 443 C.F.R. § 3103.3-8 provides: Suspension of operations and production. (a) Application by lessees for relief from the producing requirements or from a11 operating and producing require- ments of mineral leases shall be filed in triplicate in the office of the Area Oil and Gas Supervisor for oil and gas leases and in the office of the Area ?lining Supervisor for aU other leases. By Departmental Order No. 2699 and I t ~ j ~ ~ i 1 ~ . ; j J . _._ <._. _,__->._..--.....___.-r'\....~-..-.~ - ,. -."'1 ,.... - _~...,..-.---....... ~,'-;;- .... .,- ,.,#~ "'\ .....~.....----~--....-.-......~.--.-..- "'--- r-- ; . ~ " 5 Although acknowledging that Copper Val1ey had been "unable to conduct operations on a full-time basis since Geological Survey Order No. 218 of August 11, 1952, the Hegional Oil and Gas Supervisors and the Regional Mining Supervisors are authorized to a(~t on applications for sus- pension of operations or production or both filed pursuant to this section and to terminate suspensions of this kind which have been or may be granted. As to oil and gas leases, no suspension of operations and production will be granted on any lease in the absence of a well capable of production on the leasehold, except where the Secretary directs a suspension in the inter~~st ·of conservation. Com- pkte information must be furnished showing the necessity of such relief. (b) The term of any lease will be extended by adding thereto any period of suspension of an operations and pro- duction during such term pursuant to any direction or as- sent of the Secretary. (c) A suspension shall take effed as of the time specified in the direction or assent of thl2 Secretary. Rental and minimum royalty payments will be suspended during any period of su~pension of an operations and production di- rected or assented to by the Secr~~tary, beginning with the first day of the lease month on which the suspension of op- erations and production becomes effective or, if the sus- pension of operations and production becomes effective on any date other than the first day of a lease month, begin- ning with the first day of the lease month following such effective date. The suspension of rental and minimum roy- alty payments shall end on the first day of the lease month in which operations or production is resumed. \Vhere rent- als are creditable against royaltie·s and have been paid in advance, proper credit will be allowed on the next rental or royalty due under the lease. (d) No lease shall be deemed to expire by reason of a suspension of either operations or production only, pur- suant to any direction or assent of the Secretary. (e) If there is a well capable of producing on the leased premises and all operations and production are suspended pursuant to any direction or assent of the Secretary, the commencement of drilling operations only will be regarded - r- \ ..._--.....~...-_._--..-.....--~-....':- ..... ~·."".--·~T~· ~ -....;......--.-.-., ,...............'_._.... --"C"...._.....1II_,..,....;,~ _..... ~_.. _ .-._ _. ____-_._:<I""_.".....~-. ~ . .... 6 ~ , i ~ .; } . J January of 1976 by the imposition of the requirement that operations would be permitted only during the winter months," (App. Ex. V at 4), the Acting Director recom- mended that no extension of the lease be granted or recognized. On May 22, 1978, the Secretary of Interior followed the Acting Director's recommendation, ruling that the lease is considered to have expired by operation of law as of midnight, January 31t.. 1978, absent the existence of a well on that date which had been de- termined by the Supervisor as capable of producing in paying quantities. The reasons for the denial [of ex- tension] are that (1) the lessee accepted the imposed restriction that drilling could be conducted only dur- ing the winter season without complaint unti1 11 days preceding the lease expiration date and (2) the 2-year lease extension earned by drilling across the end of the primary term of January 31, 1976, afforded suffi- cient additional time, despite the restriction, in which to have completed a well that was physically capable of production in paying quantities. Memorandum from Acting Chief, Conservation Division to Conservation }'-Ianager , Western Region (June 14, 1978), reprinted in App. Ex. V at 1. \0..- '" ! ,. . . ~ , j 1 i as terminating the suspension as to operations but not as to production, and as terminating the period of suspension to be added to the term of the lease as provided in paragraph (b) of this section and the period of suspension of rental and minimum royalty payments as provided in paragraph (c) of this section. However, as provided in paragraph (d) of this section, the term of the lease will not be deemed to expire so long as the suspension of operations or produc- tion remains in effect. ({) The relief authorized under this section may also be obtained for any oil and gas leases included within an ap- proved unit or cooperative plan of development and operation. .-,- ~ .-..-...-. ....- -- . _ .___1P',.,.............,...... ...............-~...... . _. .~ ,T -~.~~'~ ".-- - ....,.. .............,.-.......-. ~~ ! ~ ., ~ î , -~..." 7 B. Decision of the District Court On July 17, 1978, Copper V:111ey W~..'\ ddvi~ed of the Sec- retary's May 22nd action, R-rd o.n A 1.lgl1.;t 18 sought a de- claratory judgrncnt in the t::.ited St<itc:.;. District Court for the District of Columbia t.!:~:l the ~\ ~':ì·t.:lal·y's refusal to permit another 12 Inonth::; of operaLio!1s was unlawful. Copper Valley r0liéd on SeeUctl1 39 of tlw ~~1ineral Leasing Act of 1920, as amended, w]¡Ích pro'lid€6 in part: In the event the SecrC:~~_~t'Y of In~eriûr in the interest of conse1'vation, shaH direct· . . . the suspension of operation~ (( nd prodn':'fi ()(t- uhder any lease granted under the terms of thi~ Act, any p:iyment of acreage rental or of minimum rn.vaJty pre~,;cJ·ib~.:d by such lease likewise shal1 be suspe:n(:ed during such period of sus- pension or operations and lJrodllctions; and the term of such lease shall be i!.dfnded llY adding any such suspension . . . thereto. 30 U.S. C. § 209 (en1phasis al1ded).5 On the parties' cross-nlOtions for surnmary judgment, the district court ruled in favor of the Secretary. Copper $ Section 209 reads in full: § 209. Suspension, wai-\'er, or reduction of rents or royalties to promote development or operation; ex- tension of lease on suspen~ion of operations and pro- duction. The Secretary of the Intl-'l'ior, for the purpose of en- couraging the greatest ultimate recoyery of coal, oil, gas, oil shale, phosphate, soòium, potassium and sul- phur, and in the i nte1'C:if (~r conse1·vation of natural resources, is authorized to \,,'aive, susl>end, or reduce the rental, or minimum royalty, or reduce the royalty on an entire leasehold, or on any tract or portion thereof segregated for royalty purposes, whenever in his judgment it is necessary to do so in order to pro- mote development, or whenever in his judgment the leases cannot be successfully operated under the terms provided therein. In the event the Secretary of ... ',;.....-_~._ ,.... .__ _____-:Jo. ...... _ .._-__ _..-_-- -.~...........--'.~...-;.......... . ., _......_ _.__..... ~. _..... ._ ._. - ...-_...__... __ _ ....."-. .............__ .. .~....po: . .. - '"'" 8 .1 ~' . i 1- t I t . 1 Valley Machine Works, Inc. v. Andrus, 474 F. Supp. 1~9 (D.D.C. 1979). The court reasoned that drilling permit ~~ strictions, which the lessee had agreed to accept in sigr.;" g the lease, did not amount to a "suspension of operat::~3 and production" because Congress meant to apply tt.at phrase only to extraordinary situations where the Secretary ord€-~ the suspension of drilling to the surprise of the !E-~=-~ in order to conserve oil and gas or where the lE-5~e requested and the Secretary assented to a 5U5p~~- sion. See H.R. Rep. Nb. [1737, 72d Cong., 1st Se55_ a (1932)] and 76 Cong.Rec. 705 (Dec. 19, 1932). ¡d. at 192. The court also indicated that Copper Yal1E-Y--5 action was untimely inasmuch as the Secretary's impo~:- tion of the "winter season only" restriction in the drilE::? permit of January 30, 1976 triggered the 90 day period ::r seeking judicial review of adverse agency action. 1¿_ (citing 30 D.S.C. § 226-2). This appeal followed. II. ANALYSIS Copper Valley's principal contention on appeal is tr~: the drilling permit's "winter season only" restriction~ by ~ --! , 1 1 I I ¡ \ ~ the Interior, in the interest of consert'ation, shall di- rect or shall assent to the suspension of operations and production under any lease granted under the terms of this chapter, any payment of acreage rental or of minimum royalty prescribed by such lease like- wise shall be suspended during such period of suspen- sion of operations and production; and the term of such lease shall be extended by adding any such sus- pension period thereto. The provisions of this section shall apply to all oil and gas leases issued under this chapter, incJuding those within an approved or pre- scribed plan for unit or cooperative development and operation. Nothing in this section shall be construed as granting to the Secretary the authority to waive. suspend, or reduce advance royalties. (Emphasis added). !II'- ._.,.~..,.,~~..~~~.,....-.-' -.'. .~...............-_.- ............ .... -.-- ....~..~~._- - _.,...~-............... "':'"- .... ..:--- ..,---_..~_.-....;._.--::-.. ... , . ~.... -.-.....-----~~:." ,_.~..-,_ -_. _...... -. - ~ JI~;.... ir.; ",..~..~:_,...~..........,4 ~:_...<.. -... -...__"....~__.... ......__ . ....._.~.- ...,.----~ -....... . .", --. --.~_... 9 preventing drilling operations for 6 summer months a year, worked a "suspension of operations and production" "in the interest of conservation" and therefore, under § 209, mandated an automatic extension of the lease for a period equal to the length of the suspension. The Govern- ment responds that the drilling restrictions did not create suspensions within the meaning of § 209. .. A. "In the Interest of Conservation" We note at the outset that there is no contention that the "winter season only" restriction \vas not ordered "in the interest of conservation." The parties agree that car- rying on drilling operations during the summer months would have substantially damaged the permafrost charac- ter of the leasehold area. Preventing such damage is ob- viously in the interest of conservation if that term is to receive its ordinary meaning. While the prevention of en- vironmental damage may not have been the "conservation" that Congress principally had in mind in 1933 ,,,hen it passed § 209,6 suspending operations to avoid environmen- tal harm is definitely a suspension in the interest of con- servation in the ordinary sense of the word.7 And there ~ 6 A congressional report accompanying the bill that became § 209 stated; [I]t is . . . a matter of public knowledge that there has existed for some time past, and still exists, a condition of overproduction [of petroleum and natural gas]. This condi- tion has resulted in the adoption by the Interior Depart- ment of an administrative policy of conservation of oil and gas. H.R. Rep. No. 1737, 72d Cong., 1st Sess. 3 (1932). "The concurring opinion asserts that "conservation" applies only to the conservation of exploitable natural resources such as oil and gas "and not to more general environmental protectÌon measures which may restrict production." Concurring Opinion (Cone. Op.) at 1. Under this view, the "winter season only" .,.. ~..-"""'r--""""""""'''____...._; ... ,.........-.......- ..J " .. .:. i ì i : f ~ I ~ ¡ ~ I j ¡ . - -.,..". - -. .. ...............~(~.... .' . ,_d~.,¡..,..............__#... . ... ". ...... - .....# ...---.--~ ;.-:.- . ~-- ..... --....._:.- - . - ..,...-~---.........-- 10 drilling restrictions could not have been imposed "in the inter- est of conservation" within the meaning of § 209 and therefore no lease extension is warranted, regardless of \,..hether the drill- ing restrictions effected a § 209 "suspension of operations and production." The concurrence makes two contentions in support of this argument that "conservation" should be construed nar- rowly: (1) the legiRlative history focuses on the problem of over- production of oil and gas, and (2) the Secretary of Interior has adopted a narrow construction of "conservation." Neither con- tention bears the weight the concurrence would have it hold. First, the legislative history of § 209 does not act to limit the plain import of "conservation," which in this century has always included the preservation of natural resources generally. Con- gress chose a general phrase-hin the interest of conserva- tion"-to define the scope of circumstances under which oil and gas lessees would be given relief from government-imposed sus- pensions of their drilling operations. That the immediate occa- sion of the congressional action was a series of suspensions imposed in order to save oil and gas cannot be decisive, for Congress surely may use the lesson of a particular his- torical period as the catalyst for a law of more general application. For this reason, among others, the rule is well established that construction of a statute begins with its language; indeed, where there is no ambigui- ty in statutory language, there may be no need to refer to legislative history at all. Stern v. United States Gypsum, Inc., 547 F.2d 1335 (7th Cir. 1977). Accordingly, absent an affinnative showing t hat Congress did not intend to give "conservation" its ordinary meaning, we should honor the congressional choice of language unless it pro- duces results so unreasonable or arguably unconstitutional that Congress must be presumed to have used the term in a different sense. There is no such affirmative showing in the legislative history here. The concurrence relies on the proposition that the plain meaning of a statutory term can be altered when the statute or its legislative history reveals an intent to adopt the special meaning that the term has within a particular trade or science. ,. "'.. _.¡#,. -_. --......·-..·~~·-rr·............·- .._-...'.- 4... ..----......-.....~~. , -., .-. ~ -~~_._--- · .___._ ........ ;..... ...._,o(w.....~..~,,~.._._... _ ..-4IIt.................~............_~"-__ _~..._ ... ..~--~. -......-:...-----....#.-...--. - -.... .--....... .--. _. __.-10_.._ ..... 11 .I Cone. Op. at 2. While acknowledging the obvious validity of this proposition, we question its application here. This is not a case, such as Cm"1Ûng Class ~Vo'rks v. Brennan, 417 U.S. 188 (1974), in which the term in question was adopted by Congress. at the suggestion of experts \\-'ithin a particular field, in order to refine a statutory definition. See id. at 198-202 (where Congress, at suggestion of industrial relations experts, added "similar work- ing conditions" to make less vague the equal-pay-for-equal-work concept of the Equal Pay Act, "working conditions" would be given the special meaning the experts gave it). The mere fact that Congress at that time was primarily concerned with "con- servation" in the production of oil, see note 6 supra, Conc. Op. at. 1 & nn.1-3, does not justify an interpretation that restricts "conservation" solely to oil. See, e.g., Stern v. United States Gypsum, Inc., supra. Nor are the results of applying its ordinary meaning to "con- servation" so unreasonable as to compel us to presume that Congress had a crabbed construction in mind. It was the inequi- ty of depriving oil and gas lessees of drilling time without any extension of their leases that moved Congress to enact § 209, see p. 16 infra, and a suspension to preserve tundra/permafrost environment is as devastating in its effect on an oil ana gas les- see as is a suspension merely to save oil and gas. Applying "con- servation" to all natural resources advances the policy of § 209; this interpretation is not unreasonable or arguably unconstitu- tional and there is no indication Congress would disapprove of the result it produces. Cf. ~Maine v. Thiboutot, 48 U.S.L.W. 4859, 4861 (U.S. June 25, 1980) (42 U.S.C. § 1983's protection against violations of "the Constitution and laws" applies to all federal laws even if p11ncipal purpose of "and laws" was to in- clude equal rights statutes; "the legislative history does not demonstrate that the plain meaning was not intended" (empha- sis added». The concurrence contends that we owe great deference to the Secretary of Interim"s interpretation of § 209. We agree, but consider that it supports our view rather than that of the con- currence. Perhaps the best evidence of the Secretary's interpre- tation of § 209 as it affects this case is the argument made on his behalf in the district court and here on appeal. This alone re- futes any assertion that the Department of Interior has .- ......-~J"ftI"Ø'....-......-..--..~_______ ~,.....'-.~ ,,< ,-- .. " . ..a..____~_._._ 12 j ~ 1 I f .~ I i 4 j . j j adherefd] to the [narrow] min(~raJ con~ervatit.'~l rationale," Cone. Op. at 3, for the Department h:1.S taken lì( i:~::'l1e \dth Copper Valley on the meaning of "in th(~ inU~rest of conservation"; it in- stead has argued that the drilling r~strictif::b does constitute a § 209 suspension. See, e.g., Secretar)"s Brii::f at 8. Moreover, the authorities cited to sho \\' the Secretary adhering to a narrow meaning of "conservat_~0n" are not helpful to the concurrence for they do Ti(,t invoh'e factual situations which squarely presented the Îf:sue of whf·ther conservation should be given its plain meanipg, or constr1.!~")(! narrowly. Far more to the point are d('p~rtmentáI :nterpretations that advocate giving the same plain J:H-'aning to "conservation" that we think is appropriate here. TV:I) instance~ of such interpreta- tions appear in a July 1975 opinion letter prepared by the As- sistant Solicitor of the Minerals Division of Energy and Re- sources, reprinted in Appellanrs Brief apµf;ndix C. The letter concludes that s1uipensions of operations to perìnit the comple- tion of environmellt~1l studies (ue cognizc.ble under § 209. As one example of § 208';..; application the letter cites the 1971 sus- pension on operations and produ·::tion on 16:1 federal oil and gas leases in the Ocala N (~tional FOY'est of FJorida "for the expre5S purpose of allowing sufficient tinw for the Dppartment to deter- mine whether additional terms and conditions should be imposed to prevent damage to the owÜ'onment within that na- tional forest." [d. at 1 (emphasis added). The Assistant Solicitor considered that this suspem;;lc>n in the interest of conserving nonexploitable natural resource~ was within the scope of § 209, because [t]here is no indication in [the section] that a suspen- sion is to be merely for t.he conservation of the re- sources subject to the lease or even of the resources subject to the ~1inera1 Leasing Act. I nstead the nor- mal reading is that it should be for the COllsert'ation of all natural resources. ¡d. at 1-2. (emphasis added) The Assistant Solicitor continued, When Section 39 r codified at 30 U. S. C. § 209] was added to the Mineral Lea:-;ing Act in 1933, the long delays for environmental studies \\'hich we now expe- rience were not expected but, nevertheless, Congress .-- -.:..- ~ i I 1 ¡ ! .. . .. - , - ~-....-..-....~~.........--~-. ......-...............-....--..--- "....-.---.. .""_.................._.. .~.... ,'_ ~_..>......._-. _ .,-'4'"...-___~ ...~ ..--.......-.--.. .... -... .. -----.~..~---..:..-...._- ._~.~. . .......¥ .. -- ...----..........-.....- ._~ .....~... ~---~.... ~....-.~ -~ . . --. .--.-~--....-;.....-. 13 was no indication that Congress intended that "conserva- tion" be given any interpretation other than its ordinary meaning.8 provided the means by which the Secretary could see to it that, despite the long delays inevitable in the compliance with NEP A procedures, lessees would not lose any of the time to which they are entitled. Con- gress has determined that the holder of a noncompeti- tive oil and gas lease should have a fun ten years in which to develop the resources subject to his lease. The Congress has also directed the Secretary to en- gage in lengthy environmental studies. The only way in which these two purposes of Congress can be ef- fectively reconciled is by authorizing suspension and consequent extension. Accordingly t it is my view that the Department ought in all cases, where the prepa- ration of an environmental impact statement or other environmental studies is required, to suspend opera- tions and thus assure the lessee that he will receive an extension comparable to the period during which operations are prohibited and thus not be deprived of any of the development period which the Congress has granted him. These interpretations, and others (see note 8 infra), are far more relevant to the scope of § 209 than are departmental statements not directly addressed to the scope of the term "con- servation" (see Conc. Ope at 1 & nn. 2-4). These interpretations indicate at the very least the absence of any consistent depart- mental adherence to an unnaturally narrow view of "conserva- tion". They confirm rather than refute our impression that "con- servation" should be given its ordinary meaning. 8This conclusion is consistent with Gulf Oil Corp. v. Morton, 493 F.2d 141 (9th Cir. 1974). The court in :~lorton interpreted § 5(a)(1) of the Outer Continental Shelf (OCS) Lands Act, 43 D.S.C. § 1334(a)(1), a provision similar to 30 D.S.C. § 209. Sec- tion 5(a)(1) authorizes the Secretary of Interior to provide, "in the interest of conservation," for the "suspension of operations or production." The court rejected the oil company's argument that Hinterest of conservation" is cönfined to conservation of oil and gas, ide at 145, and concluded the Secretary was em pow- - -. '"' .\., ........,. .-............".....~.-.-..-..... ~ ...-- -..._ .._"7"'0-..-....._...,. ----.-.- .... -..-.. -- ,. .-....... ---..-. - .......- .....--~- . '-- r-- ~ ·..·_,..·.s...._·.40 ... . '--. .~-_..._._.-- - . _.....~ ...._-_. . .. - .. ...--.....- . .. -, ~.....-.,. 1 ~ t j i j ; J ~ j f r 14 t t ¡ r l I ¡ , f I " .' 4 ered to suspend drilling operations to prevent undue harm to the marine environment. The court noted that the first portion of § 5(a) (1) mentioned "conservation of natural resources" and reasoned that the later phrase "in the interest of conservation" was a reference back to "natural resources." "Its natural meaning," the court observed, "would encompass all such resources, not just oil and gas, sul- phur and other minerals." Id. at 144, 145. (Section 209 also pre- cedes "in the interest of conservation" with "conservation of natural resources," a phrase Congress added in 1946. 60 Stat. 957. See note 5 supra.) The .tal orton court also relied on the legislative history of the OCS Lands Act, as the Concurring Opinion notes, Cone. Ope at 3 n.7, but that reliance was merely supportive of a plain reading of the statute. That similarly affirmative support for a broad reading of "conservation" is absent in the legislative history of § 209 is no reason to discard a plain reading of the section. Rather, the relevant consideration is that there is no legislative history to contradict a plain reading. Particularly illustrative of this point is the concurrence's reliance on an Interior Depart- ment opinion in claiming that: the legislative history shows that Congress intended "conservation" to be interpreted far more broadly in the OCS Lands Act than it was in the Mineral Leas- ing Act. Suspension of Operations on Oil and Gas Leases, 78 I.D. 256, 258-60 (1971) (opinion of Interior Dept. Solicitor). Congress used "conservation" differ- ently in § 209. [Cone. op. at 3-4 n.7.] In light of this claim the Su.spens1~on opinion itself is worth ex- amining. The issue presented was whether oil drilling opera- tions suspended under the DCS Lands Act for environmental purposes were "suspended in the interest of conservation." The opinion reasoned in part: Although the statute authorizes the Secretary to issue regulations for the suspension of operations in the interest of conservation of natural resources the term "conservation" is not defined in the statute, nor is there any explicit definition of the term in the legis- lative history of the Act. However, conservation is defined in the dictionary as: 441. A conserving, .. '"" f I l ( , ~ ............ ....................................,.. ""-_,,,~,_, --_...--,..-.... ". ."_I.A_....-">~· ...1....,.\....-~.3_~·.....,........--....~______·_·......·,_·._.........--.____... -~..~~_. ---. ~.. ,.---.... . ~ "...................."" . , . ... . .... ·_·_......1'\....... ._ ..~ .....~......._._. ...., . . ........- ._- .. __"~_. .-....:1... ~.._. .-...... _ . _.._ ._.._~ ~ 15 B. 14Suspen~ion of Operations and Production" 1. The Secretary-'s "Surprise Theory" The Secretnry asserts t.hat § 209 Uwas designed by Con- gress to cover only uW1nticipated interruptions of drill- ing.u Appellee's Brief at 13. Under this view, whether a § 209 suspension has occurred depends on whether the "winter season only" restriction was a surprise to Copper Valley. It is in this context that the Secretary emphasizes that the lease gave "notice that drilling activities would be subject to restriction," that Copper V alley udid not pro- teHt .against. the restriction until t\VO years after the per- mit was iSSllCd," and that Copper Valley "continued to pay rent during the thaw months without attempting to assert that the dril1i ng permit condition ,vas a surprise." I d. \Ve find it unnecessary to consider whether summary judg- preserving, guarding, or protecting; a keeping in a safe or entire state; preservation. 2. Official care or keeping and supervision, :is of a river or forest * * *." Vlebster, ]Vew International Dictžonary (2d ed. 1943). Even if the te?~m "conseïL'ation" should be lim.ited to its use in the mining industry, a similarly broad definition u.Jould be applicable: "conservation: conserving, preserving, guarding, or protecting; keeping in a safe or entire state; using in an effective manner or holding for necessary uses, as mineral re- sources." U.S. Department of the Interior, Bureau of Mines, A Dictionary of ¿Uining, Mineral, and Relat- ed Tenìls (1968). 781.D. at 258 (emphasis added). Then, like the court in Jforfon, the Interior opinion also relied on legislative history, but that language simply confirmed that the Act was to be given its plain meaning. The Interior opinion does not contrast the scope of "conservation" under the oes Land Act with the scope of "con- versation" under § 209. Neither it nor any legislative history shows that Congress intended "conservation" to mean one thing in § 209 and something else in a later statute whose language and purpose is in many respects the same. -..--.-....--... _...·.~._w- ~.~......._.-_. _......... .- 11I'!"'-':P"'~ ~ , ' . -..... ~"~-" - - . . - ... ~ '''~'._''~--'''''''-'''.'- --~ -- ~~.. 16 nlent ',va.:Y « ppropriate on the question whether Copper Valley Cl)U ld foresee the suspension of drilling, for we re- ject as un~)érsuasive the Secretary's attempt to narrow the scope of the plain terms of § 209. 1\S indieated in note 6 supra, § 209 was enacted in a period when the Secretary was suspending the drilling op- erations of oil and gas lessées in order to alleviate the problt~ln of excess petroleum production. The congres- sional report explained that the bill reliëve[s] lessees of coal and oi1lands from the neces- sity of paying prescribed annual acreage rental, dur- ing periods when operations or production is sus- p(~n(kd, in the interest of conservation, either by di- rel..:tÎon or assent of the Secretary of the Interior, and [provides] that the period of such suspension shall be added to the term of the lea'se. '. .... " The obvious fairness of such a provision would seem to render unnecessary any extended comment in its SUPP01·t. That which can not be productive of any re- turns to the lessee, by reason of the direction or as- sent of the lessor, should not be made a liability by requiring the lessee to pay annual acreage rental. Ø>r Where, by reason of the positive directions of the Secretary of Interior, or by mutual assent of the Sec- retary and of the lessee, production is prohibited from the leased area, the suspension period surely should not be counted as a part of the prescribed term. Hence the provision that such suspension period shall be added to the life of the lease. H.R. Rep. No. 1737, 72d Cong., 1st Sess. 2-3 (1932). Because some of the oil and gas lessees who benefitted from the lease extensions and rent moratoriums of § 209 might have been surprised by the petroleum glut and the - --,..-.--,....-_.. -.. -.. ,- ~. --.,.....~~-- -_. _. -_~_..._......,......,......______ " ,\~' _ ,~""""""",,,,'S:.,,,:",",--,,.. ,~.............. ".......------- .' <1.._...._,....... _.. ....... _-............~.,¡_...-....._......·..._.·~~4........~_'.---..._"....... _ .._.~,.,,-..¿.......-'_ _.....~.-.4..__ .___ 17 . ............-.._~- Secretary's ensuing suspensions, the Government con- tends that the section, which by its terms app1ies to any Secretary-imposed "suspension of operations and produc- tion," actually applies only to those suspensions that are the product of unanticipated events. To state this conten- tion is to suggest its refutation. The plain meaning of a statute cannot be overcome by speculation as to some un- stated purpose. Nothing in the legislative history of § 209 suggests, much less establishes, the narrow interpretation the Secretary would have us adopt. Rather, the history is consistent with the statute's use of the word "suspension" in its unqualified sense: "The very purpose of the bill is to give some equitable consideration to the many leases where the Department of the Interior, by its order. has prohibited production of oil from the leases." 76 Congo Rec. 705 (1932) (remarks of Representative Eaton). It was further explained: "It seems unfair for the Government to order lessees to refrain from production and then collect rent for the non-production period." Id. at 1881 (1932) (remarks of Representative Eaton). Precisely the same rationale underlay the decision to extend leases for the period of the suspension. H.R. Rep. No. 1737, 72d Cong., 1st Sess. 3 (1932). There is no indication that Congress thought it desirable or possible to distinguish between lessees who were surprised by suspensions and those \\'ho anticipated them. The Secretary's speculation, suspect on its own terms, has no support in the legislative history and cannot modify the statute's plain terms. We thus find it irrelevant, insofar as extension of the lease is concerned, that Copper Valley paid rent without protest during the two year extension of the ten year pri- mary term. By paying rent Copper Valley protected its rights by eliminating the basis for any contention by the Secretary that it was in default. \Vhether the lease was extended or not, rent would eventually be due for the full two year period. Now Copper Valley has fully satisfied its rent obligation through the extension period it will receive by virtue of the suspension. . -·......r~-~ ..~-..-....-.~ ':':"......_....... __._..__.....____......._ __._ -'-"" ._._----_.~ ~ ~ - _. -- - -- ------... '-- ,..,-- ~ ~, . ~ -.J..-~"''''4 """__ .' 4/.' . ~:._..., .......... __~ ~ .... ri-__,_..:-.'.. ~ ." 18 .. "'io The Secretary also contends that Copper Valley's in- terpretation of § 209 could double the term of all leases on Alaskan tundra, contrary to the congressional intent that the term of a non-producing non-competitive lease be lim- ited to 10 years, with the possibility of a single 2-year ex- tension. 30 U.S.C. § 226(e). Contrary to the Secretary, we perceive no conflict between-Copper Valley's reading of § 209 and a sensible reading of § 226(e). \Vithout under- taking to decide that issue, which is not before us, we note that § 226(e) gives the lessee a minimum number of years in which to develop the resources subject to his lease. Sec- tion 209, consistent with this policy, extends the life of the lease to the extent that the lessee is deprived of his full term by the Secretary's suspension of drilling operations in the interest of conservation. Far from undermining § 226(e), § 209 effectuates the policy it reflects. The law was intended to apply uniformly throughout the United States and give lessees in Alaska the same full term of enjoyment as lessees in the lower 48 states. If climatic conditions in Alaska cause the Secretary to order a sus- pension in the interest of conservation it is not to be con- sidered as being any the less a suspension because the rea- son that prompted its imposition was forseeable. 2. The Secretary's discretion not to invoke a suspen- sion The Secretary argues in the alternative that not- withstanding the terms of § 209, '"that section gives the Secretary discretion not to invoke a suspension." Appel- lee's Brief at 16. It is in this context that the Secretary emphasizes the second reason given for the denial of ex- tension: Copper Valley had had sufficient time to drill sev- eral wells in the area under lease. This position rests upon a misconception of Copper Val- ley's request for an extension. The Secretary treated the January 20, 1978 letter as an Happlication by [a lessee] for relief from the producing requirements or from all operating and producing requirements of [its lease)." 43 . __''''''_ ._.~.......,..._~..-......-...__........._... '_.~"4."""'._~P~~""""""'-' _.............~....___ ..~~.-_.....~~ ...._~ '":'" -"'--"""""-- -'~.-.w_.._..._...,.__. -:~-- ~-~- ._- _._._-.,~--- ., '-'-'-..- - ...- .. '. ,... - \ " ~....._- -..~.....~ . .... ....0-- _,; J.' ......... ~ -..;..... - .~,..... . ..'-- ..-.... -. , .. 19 C.F.R. § 3103.3-8(a), note 4 '<;'¿://((1. IIowe\'er, Copper Valley has never applied for rel\E~i ;~':nn any producing re- quirements within tht~ Jr.èaning {)f the regulation. Al- though some languagl~ in the l'ëg-ll1:ltion might be con- strued to favor the S(1cretary's CÜìbtfuction, it is clear that the regulation, when read i~l i~s entirety, aims at situations where lessecs make applications for suspension (IÎ (¡pcrations or produc- tion or both . . . pur~uant to t his section and to ter- minate suspension~ of this l\iid which have been or may be granted. A8 to oil and ;':a.s leases, no suspen- sion of operation~ and prorluct.i'.1T1 will be granted on any }ea5e in the abi'ence of ~Å \':en capable of produc- tion on the leas2hold, except \vhere the Secretary di- rects a suspension in the i 1~ ~ e rest of conservation. Complete information Inust L~, furnished showing the necessity of such reJief. 43 C.F.R. § 3103.3-8(a). Here, by contrast, the suspen- sion was not applied for and obtained by the lessee but was ordered by the Scerdai'Y. This is not a case where the Secretary was asked to invoke a retroacti\'e suspension, but one where he was asked to rc('ognize that a suspension has been invoked by his action. \Vhatever relevance dila- tory drilIing may have when the lessee asks for a suspen- sion, it is not a rele\'(}nt consider[;.tion where the suspen- sion has already been directed by the Secretary. 3. The Secretary's Prior Decision in Te.raco, Inc. Additional support for the conclusion that § 209 required an extension in this case appears in Texaco, Inc., 68 I.D. 195 (1961), a case neither referred to by the Secretary in his decision nor, it appears, brought to the attention of the district court. In Te:taco, the lessee was denied an oil drilling permit in order to preserve potash deposits. The Secretary held: . Inasmuch as the record in this case indicates that the refusal to permit tÚ-illing on these leases amounted to an oì"der p~'ohibit infl all ope'rations thereon and that . -.-... ~ -,-of .-........ ..... .". ..~ ."'._":""....;: . '__. ..... --.--. - ---- .~ -- .-".. . .. -"'~"-'-~- ¡. .-~' . , \ " . ..-.....~._.. . .".........~~--..~. .....__.....~~ 20 the ord\:.'t 'Nas in Llìe interest of conservation, the ap- pelbr:t.'s applicHtiün Îor suspension under § 39 [30 U ,S. C, ~ 209] may be allowed, I d, at 200 uH:1phasis :ldd:..~d). The "winter season onI~-" re- striction ir.ví.¡1ved h(>l'c was not a total refusal to permit drilling b:.;t (Hd amount to a refusal to permit drilling for a six month fi(: :'ioù each year. 1:1 nder the rationale of T € :taco thi8 reGtrh:ti~)n must be interpreted as having caused a 5L~ nlOnth st!~~~l:ndon in each year of Copper Valley's "(Jpera- tions an(~ t-}:..c~duction," . . ; In this ('~':~e the distritt court relied upon a conclusion that all pj'(J\"!sions of the drilling permit issued during the primary t ~'~'ln of the lease were incorporated into the lease. A~s1J!11Ìng this is so, the statute nonetheless man- dates t1ì:1L t~e lease "shaH be extended" for the length oi the pel'lod i:: which operations and production are 5US- pended 111 the interest of conservation. The Secretary's decision ir: Texaco, Inc., which involved a similar lease. states thctt no distinction is to be made between those cases \Vh(~l'é the lease expressly provides for the po::-sibil- ity that Cìp2:'ations might be curtailed or prohibited and those tU~~CS where the lease does not contain such a provision. [N]o valid reason suggests itself for distinguishing . . , between leases which do and those which do no~ ('.ontain stipulations or provisions restricting or limit- ing operations and production under designated cO!!ditions. _.- ... "' ¡d. at 199. The source of the Secretary's authority to im- pose the driIling restrictions, then, is irrelevant for pur- poses of deciding whether a lease extension is require-d under * 209. All that matters is whether these re5tric- tions, admittedly imposed in the interest of conservatio~.. were sufficient under the statute to constitute a "su~per.- sion of operations and production." If they did. the lea5~ must be extended. And Te~:aco, Inc. holds that withho!d- ing permission to drill is a § 209 "suspension of opl:rati0r~ .... ~. .....~. . - . .... ".--' - ,. -- ~--. -... -'.~.......~-- -.,........ ......,.---............;- ~. -.-,~........-.. --.... ...--.-- -.... · "- .....-..J.............;~._~._ ~....._. ~_. ._-~_.~......"- ~....~.:..~--._-- ~.~.~~-... _.,- -.--.,..........--. .....".~--_......- ----~ ~. -~ 21 and production. "9 Thus, under the Secretary's 0\\'11 prece- dent, as well as under our independent evaluation of § 209, the control1ing question is answered contrary to the dis- trict court decision and under the statute the lease is ex- tended for a period of time equal to the total period of suspension, i.e., 12 months. to --. 9 Texaco, Inc. is consistent with past agency practice. In Marathon Oil Co., 19 I.B.L.A. 1 (1975), the Interior Board of Land Appeals recounted that a 20-year oil and gas lease issued effective July 20, 1935 had limited the [lessees') drilling rights to the drilling of wells which were "necessary to offset drainage from the leasehold through wells on adjoining lands unless and until authorized in writing by [the Secretary of Interior J to drill or produce additional \vells." By letter dated October 2-3. 1941, the Acting Supervisor of the Casper Office, Geol.:gi- cal Survey, informed [the lessees] that the drilling res:ric- tions in the original lease would be terminated effec!ive January 20, 1942. Accordingly, pursuant to sectioH .39 of the Act of Febtuary 9,1933,47 Stat. i98, 30 U.S.C. § }09 (1970), the original lO-year term of the lease leas extendfd to January 20, 1962. Id. at 2 (emphasis added). This indicates that the Secretary has interpreted drilling restrictions as a suspension of operatiúns under the lease. 10 Although the concurrence mainly disagrees with our con- struction of the phrase "in the interest of conservation," it a!so denies that § 209 mandates a lease extension once a suspen~iDn in the interest of conservation has occurred. For this proposi- tion the concurrence claims support from 30 C.F.R. § 221.2hb): § 221.21. \Vell-spacing and well-casing program, well operations, required offsets, diligence, compen- sation in lieu of drilling. * * * * ....- (b) The lessee shall not begin to drill, redrill, re- pair, deepen, plug back, shoot, or plug and abandon any well, make water shut-off or formation test, alter the casing or liner, stimulate production by vacuum. .-......----~- __r ....'..... .......,..:..........;. ..11:".....',.,. -- .._..~-__ ...6__...._ ~ ' . ""\ . ..-. - . ..:. ,.. .",~.,.~.~._"'--" .... ..... _ .. !....;.....'._""""-'-~...____ ...¡.:---:.f...;.I'....~.,¡~..'" '... - _.~_.... ... 22 C. Statute of Limitations After ruling against Copper Valley on the merits, the district court indicated that Copper Valley's action was also time-barred because it never sought administrative review of this [Uwinter- season only"] restriction pursuant to the prescribed ... 1 acid, gas, air, water injection, or any other method. change the method of recovering production, or U::e any formation or well for gas storage or water dispo~- al without first notifying the super\'i~or of his plan and intention and receiving written approval prior to commencing the contemplated work. The app"oval by the supervisor of a drilli ng plan does not constitu.te a determination or opinion that the lessee will be enti- tled to an e~rtension of Jz is lease under any extensinn provisions of the public-land or acquired lands miii- eralleasing laws if he carries out his plan. [Emph2.- sis added.] The italicized language was added to the regulation five years after the Department of Interior decided Texaco, I nc., S if prQ. 31 Fed. Reg. 2614, 6415 (1966). Although the Secretary rites the regulation only as the proximate source of his authority to impose drilling restrictions, the concurrence contend~ "l t]he regulation precludes th~ § 209 automatic extension argument . . . ." Cone. Ope at 3 n.6. The argument apparently is that the 1966 amendment to § 221.21(b) modified the Department's rec- ognition in Texaco, Inc. that a refusal to permit drilling amounted to a § 209 suspension requiring an appropriate exten- sion of the lease. In our view the italicized portion of § 221.21(b) has no appli- cation to this case, making the absence of any reliance on it by the Secretary perfectly understandable. The caption of § 221.21, which remained the same after the 1966 amendment to subsection (b), indicates that its subject matter is the regulation of ongoing drilling operations, not the suspension thereof. The language of § 221.21(b) confirms this impression. It lists seyeral drilling-related activities, none of which is to be undertaken un- less specified in a "drilling plan" to be approved by the supervi- sor. There is no mention of the drilling restrictions at issue in . '""~,_...-....---' .~- .--........-.-- "." .. - ......,.......-..-.. ... .........~~'....~-....,,- . .. v .~....--......--'..,....,.......-~-- - . ....-...,..--.. _.....~ , ~,~. . . '. -........ .....""'"'" ...,. '. . ......~."'..,,--.- ~ .~-_._. -..~----._. ~.- - 23 proce(hl1¡~ jn 30 C. F. R. § 290. Such a review proce- dure ha.:: been set up to lead to a final secretarial deci- Texaco, Int·. The l'egulation on its face thus serves to warn les- sees not tú r0-ly on the mere approval of the lessee's "dri1lir¡g plan" as entiUing them to any lease extension under the "exten- Rion provisions" of the mineral le~sing laws. The eoncm'renre presumes that "extension provisions" must refer to the lea~e extension provision of § 209, but we look for a more reaEonable subject of the reference in light of § 221.21(b/s total lack of eon cern with drilling suspensžon. One possible 5ub- ject of the nJfrence is 30 D.S.C. § 226(e), which provides thàt any lease Or1 which "actual drilling operations were commenCfd prior to the end of its primary term and are being diligently prosecuted at th~1t time shall be extended for two years. . . .~' 30 V.S.C. § 22G(e). This statutory provision mandates a lea~e extension whenever "actual drilling operations" are begun ar:d are in proces~ at the end of the primary term. Certainly the De- p~niment would want to inform lessees that mere approval of drilling operations would not constitute a "commencement" of such operations so as to require an extension of two years. Supporting this interpretation is the language accompanyÍ!".g' the promulgation of the 1966 amendment. The Secretary of tÌ:1? Interior stated: The purpose of the amendment is to make it clear that the hpproval by the Geological Survey of an oil and gas lé.;~ee's plans to drill a lrell does not consti- tute a determination or opinion that the lessee will earn an extension of his lease if he ca rries out his ]Jlan. 31 Fed. Reg. 6414-15 (1966) (emphasis added). This amendment was therefore apparently offered as one of clarification as OJ}- posed to one in \vhich Department precedent was being over- turned. The complete absence of comments, suggestions, or ob- jections to the amendment further supports this view. The regulation would not seem to provide any authority for the Sec- retary to depart from the interpretations set forth in Te:raco, Inc., 68 I.D. 194 (1961). That rel{lilation 221.21(b) was not meant to have any effect on § 209 is further confirmed by a 1971 opinion of Interior's Solicit- . -~'~"-""--"'-'.--.~ -...,~- -..--,-...--. ,øo ..., _,_, -~ ."._.-___ -~ .-- . ~ - ... --.- ._--- ,..-... .. --- -. . -.-..-... ....- -- ~___ .__ - -___·._0'·· .~-__ --'- -~ . '--- ~ . " -- j i .:1 ¡ I I ._~_.' _ .. .. _~~_~_. .'.~"_""""'_ . _.,'~ _....c....-..............- ._ _....._~.,..~. _ ., _....-~_.----.-..._...... Þ .---., , J . 24 IIO ! sion and trigger the ninety-day statutory judicial re- view procedure set forth in 30 D.S.C. § 226-2. 474 F. Supp. at 192. Copper Valley, however, was under no obligation to contest the restriction. It does not contest the authority of the Secretary to impose the drilling re- striction and is not ob1igated to contest restrictions it ad- mits are legally authorized., As 30 U. S. C. § 209 recognizes, the Secretary had authority to impose such restrictions and the statute provided that in such event "the term of such lease shall be extended by adding any such suspen- sion period thereto." I d. (emphasis added). Accordingly, since Copper Valley did not (and does not) contest the au- thority of the Secretary to impose such drilling restric- or's office. The opinion analyzed the Outer Continental Shelf (OCS) Lands Act provisions governing suspensions of opera- tions on oi1 and gas leases. The Solicitor concluded that the Act granted by implication an extension when the Secretary has di- rected a suspension of operations. Of more interest to the prob- lem at hand are the observations made by the Solicitor in arriving at this conclusion. In examining the legislative history of the OCS Lands Act, the Solicitor noted H.R. 5134, the House version [of the OCS Lands Act] . . . incorporated nine sections of the Mineral Leasing Act. One of these sections was section 39 of the Min- eral Leasing Act, [30 V.S.C. § 209] which gives the Secretary specific statutory authority to suspend op- erations and production on oil and gas leases in the interest of conservation and likewise requires the ex- tension of the term of leases u.:hich have been suspend- ed. There is no doubt that the House version of the bill as originally presented would ha ve required the Secretary to extend leases on the Outer Continental Shelf which had been suspended in the interest of conservation. 78 J.D. 256, 262 (1971) (emphasis added). The mandatory, self- executing nature of extensions to be granted under 30 V. S. C. § 209 would therefore appear to be an Interior Department in- terpretation of long standing, unchanged by the promulgation of 30 C.F.R. § 221.21(b). \~' It' .. '#".-.... - ..~....-.-,... ..---'- ---..,-. ...,.." #....,....... .. ~.....~. ._. .'_'. ",.._.."",..--- ...._'" ..',.pl........ ....,~----".. ..~.. tfI' ~ .- ---...., ,-~._-\.........,..~---._-- . - - ----,-- ----~.--_.. -- ., . ...,,'..':"~",.- _ ...-..,A. ....··r.·_. ... ,...,... _".1_ ~......~_.......~ "_4 .- . ~.._-..~_.'-' .. ,",'._.#_~~."A...' 25 tions, it was not in the position when the restriction was imposed of "contesting a decision of the Secretary involv- ing an oi1 or gas lease." 30 U.S.C. § 226-2.11 Thus, when the permit was granted with the restrictions, Copper Valley was not required to appeal and obtain an agency decision as to the ultimate consequences of the Secretary's action, if any, on the term of th.e lease. It could assume that the agency would abide by the provisions of the Act and recognize that the suspension of operations extended the lease at the end of the term thereof. Copper Valley is now seeking review of the refusal to grant the automatic extension of the lease which is called for under the statute. It is not appealing the decision of the Secretary to impose the six months dril1ing restriction but merely seeks recog- nition of the extension of the lease that such suspension mandates under the statute. The Secretary diverges from the district court's opinion to suggest that Copper Valley's action is time-barred for another reason: Copper Valley should have sought review of the Oil and Gas Supervisor's letter of September 2, 1977, which informed Copper Valley "that the lease would expire on January 31, 1978, unless production in paying quantities \vas developed." App. Ex. R. Whatever may have been the merit of this position had the Secretary re- lied upon it below, he in fact did not. Instead, the Secre- tary decided Copper Valley's administrative request on the merits. Thus, assuming without deciding that the Supervisor's September 2 letter was a "final order or deci- sion" that "adversely affected" Copper Valley, 30 C. F. R. § 290.2 (1979), the Secretary failed to treat it as such and cannot do so now. An agency that does not raise the issue 1130 D.S.C. § 226-2 provides: "No action contesting a decision of the Secretary involving any oil and gas lease shall be main- tained unless such action is commenced or taken within ninety days after the final decision of the Secretary relating to such matter." _e~;~........._ _. ·.,Y--e-'" .._....~...._-......._.......~.._...._, _. __......,.".-......__._.__ _~_ .___..._..__. ___..._ __..__ _ ...... . -_._---. ... 411 ~ ...,. ." . '- . --- . ....~........_o.--.. ... '" ,.;_" _~..... -..; -.-10./. _'__-, --..-:..." ~~_.'¡".___..._ . # .__.. '''-'. .Þ."I___'-"'-~ . __ ...._ .;-_.:...L..:~, __ . ~ .. _. I -"'., _.~""i"_-..o...~ _ . _ 26 in an administrative proceeding waives the applicability of a limitation period prescribed by its regulations. J:ÿJ ontship Lines, Ltd. v. FlHC, 295 F.2d 147,151 (D.C. Cir. 1961). It remains only to note that the final secretarial decision occurred May 22, 1978, and that Copper Valley received notice of it in mid-July. The declaratory judgment action of August 18 was within the allotted time. t J . ~ D. Disposition of the Case In this case the Secretary far from adequately explain- ing his departure from the precedent of Texaco, has com- pletely ignored it. Affording different treatment to similar situations is the essence of arbitrary action. The Secretary also has arbitarily ignored the language of § 209. Ordinar- ily this agency conduct would call for a remand for proper application of the appropriate legal standards, if the agency under the law could reasonably adhere to the re- sult its challenged decision has reached. See, e.g. Public Se1"Vice Con~'mission v. FPC, 511 F.2d 338,355 (D.C. Cir. 1975). On the undisputed facts here, however, we conrlude that no reasonable interpretation of § 20~ can deny Copper Valley the extension it claims. Accordingly , the judgn1ent of the district court granting summary judgment for the Secretary should be vacated and the district court in ac- .- ~ -- Òt .. -.. -_. - - '#~" - _.....~---- ----~-~~ -... -- -......~,~#- ..--...........~~,..~-.---~_...-.- .... .p..-- ---~~-~_. . . ..,.~,..._'._~..w-. ~.-. ~"'.-.'-~~"d...............~~"__..~;s.._... .__..-......~.¥tio .......~..... -........ _;,~~'t.....:... _'., . 27 cordance with the foregoing opinion should grant the mo- tion of Copper Valley for summary judgment in its fa\"or.12 Judgment accordi ngl y 12 \Ve cannot join the speculation that ordering a lease exte~- sion in this case will "create sigllificant new land title difficultie5 in areas which have been subject to leasing, make new in\"est- ment in oil exploration substantially more risky and expensiye. and shortchange the United States as lessor, by conferring an unbargained-for windfall on the holders of existing leases." Cone. Op. at 4-5. The Secretary has not acquainted us with these asserted problems. If conditions in Alaska require a spe- cial exception from § 209's plain meaning and policy then Con- gress is free to create one. In any event, were speculation with- in our province, we would venture that assuring oil and gas lessees, through lease extensions, the full exploration period that Congress has given them would promote new investment in oil exploration and benefit the United States. The United State5 is not shortchanged in the process; it is merely held to the lease terms specified in its statutory bargain. , ; ¡ r_~.._ _.._ _~."r"_-"~"""'_'_'_!:" _.,...~_ __.,. ,,--- _..._...._-...............~-~.._--- . .........---...-..... . . . -- .-.--.--,-- ~ - .. . .-.----- ... .. ;. ... ,~;"""""""'.:....."JI""':""~"""-""':""'~~'--""'""tfo.-.,.. _.-....~_.~,- ~ :J.".~.~....__~............. fI' ;... __;~...'-¥___......~.~...._...__ ..... "..,.;.:.............¿___.................. '_"'___..___......~.___...__... __ .~ ¡ '\. 1 Pratt, District Judge: concurring in the reJnand: I concur in the remand, but for reasons different than the majority's. Congress intended the term "conservation" in § 209 to refer to the conservation of mineral resources, and not to more general environmental protection measures which may restrict production. The history of the 1933 statute shows that the concept of mineral conservation was ad- vanced repeatedly by the bill's sponsors and managers, and was agreed to by opponents.1 The Committee Reports on this and closely related suspension legislation reinforce this understanding.2 This \vas also Congress's intention when it amended § 209 in 1946, an intent shown both by the statu- tory language and by the legislative history.3 \Vhere, as .. " ' 178 Congo Rec. 15363-65 (1932) (remarks of Rep. Eaton, Floor Manager); 79 Congo Rec. 704-05 (same); 79 Congo Rec. 1881 (19:33) (same); 79 Congo Rec. 3385-86 (same). Opponents agreed. 78 Congo Rec, 15364 (1932) (remarks of Rep. LaGuardia). IS. Rep. No. 812, 72d Cong., 1st Sess. 3 (1932); H.R.Rep. No. 1737, 72d Cong., 1st Sess. 3 (1932). The same Congre~.s enacted relief legislation allowing the Secretary to extend oil and gas prospecting permits where they had been suspended in the interests of conserving oil. Act of June 30, 1932, ch. 319. 4-; Stat. 445-46 (1932). Under the Mineral Leasing Act as it stood then, Copper Valley would have held a permit and not a lease. Consequently, the Department's construction of this permit ex- tension statute, a construction strongly emphasizing mineral conservation, is especially relevant here. Letter of Interior S~- retary Wilbur to House Pub. Lands Comm., reprinted ill H.R.Rep. No. 1145, 72d Cong.,Ist Sess. 3 (1932), and in S.Rep. :\0. 786, 72d Cong., 1st Sess. 3 (1932). 3 Congress continued to use uconservation" to refer to the con- servation of mineral resources and their greatest ultimate re- covery. The first sentence of § 209, added in 1946, authorizes lease adjustments "for the purpose of encouraging the greatest ultimate recovery." The last sentence, also added then, applies .-. f 'WJ,¡ ~ . _"'.;..... 'I.~ -, ~.\. ...... '..-. ......, _.. _\r..', __'. ......--.._--..~_ '^.... -'..J. *-' .......,.......... .............. - -."... -.... ,...-1- -....-.,..,.-_. _ ....' ,.__ "'...- -._- -"--..-.- ~-'-" -,... . . --.~. - ~_.---_. ----.------- '-'- - .... .. '. . .. "'-r '" . .....~........:.s...~_-~...~..::.~.,.-í:.,......~......._..... _.~,¿f'C' '^ -.tao.'~ ~.µ...... .:.".~..........~-......_..... '. ~ ....~..:.-..,..w.....~......ï..J___ _þ h.....-.·~........·li ~-... ~ -~;....- 2 . ~ here, Congress incorporates words with a special meaning in the regulated field, and does so to overcome industry ob- jections to the regulatory program, that congressional choice is entitled to special weight. Corning Glass \rol·ks v. Brennan, 417 U.S. 188, 201-02 (1974). The majority reads "conservation" in its modern sense, and inadequately weighs the special meaning of the term "conservation" in- tended by Congress. The Interior Department, which had authored and advo- cated the 1933 and 1946 statutes, interpreted § 209 to apply only to mineral conservation.4 This example of con- temporaneous construction by the responsible cabinet offi- cer is strong evidence of the original meaning, especially where Congress reenacts the statute consistently with that construction. E.g., United States v. Sheffield Boatd of Commissioners, 435 U.S. 110, 131 (1978). The Department acted consistently with this interpretation in subsequent administrative adjudication and rulemaking. The decision in Texaco, Inc., 68 I.D. 194 (1961), relies strongly on this § 209 to unit development plans, plans authorized ufor the pur- pose of more properly conserving the natural resources of any oil pool, field, or like area." Act of Aug. 8, 1946, ch. 916, § 5, 60 Stat. 952 (1946). Conservation is used in this sense elsewhere in the amendments: certain restrictions may be waived uwhenever . . . the conservation of natural products may require it;" and subsurface storage is authorized "to avoid waste or promote conservation of natural resources." Id., 60 Stat. 954 (1946). The Interior Department, which had submitted the language of § 209 enacted by Congress, strongly agreed. See Develop- ment of Oil and Gas on the Public Domain, Hearings Before the Sen. Comm. on Pub. Lands, 79th Cong., 2d Sess. 232-33, 239 (Statement of Secretary Krug); Id., at Appendix, 18, 23 (Dept. report and substitute bill, including current version of § 209); Development of Oil and Gas on the Public Domain, Hearings Before the House Comm. on Pub. Lands, 79th Cong., 2d Sess. 9 (1946) (Statement of Secretary Krug). 4See notes 2 and 3, supra. --~. .-- ............- --.-.-.....--. __.._.~___......_~.- .._.-__- ._.........._.........",..,...-Þ*'....---. ...~.. -_..~~._-......,_.. 4IÞ ~ . _ _- ..... "'_. __~....... ~. 'OOl. . ... .. . ._~~o\A~....,:;"....,.·..,....s,~;.....~~.... t~.....·._ ~.,__-"'-~.&,~~_'..___ -...-._.....;......JwIiIo.._,._~. ..' .........,~.....;>.'-__ ..'_.., _..._................-.....-._.. , ".--- 3 mineral conservation rationale.5 Later rulemaking sharply restricted the grant of lease extensions based on driEing permit restrictions imposed for reasons other than rrun~ral conservation.8 That is precisely the sort of argument Cop- per Valley advances here, since it contends that the De- partment's imposition of winter-only drilling restrictions in the drilling permit operated automatically to extend the lease by the same amount of time drilling was forbidden. The Department's aåherence to the mineral conservation rationale is entitled to respect.7 E.g., California v. l}nited States, 438 U.S. 645, 675-76 n. 30 (1978). 5Texaco was denied a permit because oil drilling would ha\""e resulted in the loss of more than a million tons of pota~h ore. See Texaco, Inc., 68 J.D. 196-97 (1961). The lease was extend- ed (evidently after potash mining) because the permit denial conserved potash ore. Id. at 198-99. Potash is covered by the Mineral Leasing Act. 30 V.S.C. § 181,281-85 (1976 ed.). 630 C.F. R. § 221.21(b) (1979 ed.). The regulation precludes the § 209 automatic extension argument since the Secretary acted pursuant to his extension authority, including § 209. when he proposed and promulgated the regulation. See 31 Fed. Reg. 2614 (1966); 30 C.F.R. § 221 (19i9 ed.) (history note). Tr:e Secretary failed to rely on that regulation in dealing \\;th this ca....;e, however. 'The majority's reliance on Gulf Oil v. ~lorton, 493 F.2d 141 (9th Cir. 1974), is misplaced. That decision allowed suspensions under § 5(a) (1) of the Outer Continental Shelf (OCS) Lands Act, 43 U.S.C. § 1334(a) (1) (1976 ed.). to prevent oil well blow- outs in the Santa Barbara channel. That interpretation of the OCS Lands Act is neither controlling nor persuasive on the ~1in- era} Leasing Act extension question here. The language of § 5 (a) (1) differs greatly from § 209 of the Mineral Leasing Act. Moreover, the court found that the Submerged Lands Act's broad statutory definition of conservation, 43 V.S.C. § 130H e) (1976 ed.), was incorporated into the OCS Lands Act. Gulf Oil v. Morton, supra, at 145. That definition includes plant and fi~h life, as well as mineral conservation. I d. The Mineral Leasir.g Act incorporates no such definition. Finally, the legislative hi£- , I --...-.........-~-~-,...,""'1'·,.-,...:-~~~--_...--........-·--..-..----þ.r---· _, .__ -----.-. __ p .._______ _..-_...._____. ~, .. .. .- . ~..................,._. ....... _...__-..-...... ".:..-".~z~~_.~-"~.~~·- --.........;.~-. ......... ..."..._~,-' . -. .~- ~ .." _.._.._...-....._~.......- .. ;"'..,... '...... ~ . . - 4 I think a remand appropriate however, for the Secretary and his subordinates relied on legally irrelevant grounds to deny the extension.8 The District Court should return the case to the Secretary and require him to decide explicitly whether winter-only drilling restrictions are "suspensions" under § 209, and to state the policy and legal reasons for his choice among plausible interpretations of § 209. There are sound practical and legal reasons for this ap- proach. We know little more about Alaskan drilling than the fact that it is expensive and difficult. By pronouncing a rule at sharp variance with present practice in Alaska. we may create significant new land title difficulties in areas which have been subject to leasing, make new investment in oil exploration substantially more risky and expensive. and shortchange the United States as lessor, by conferring an unbargained-for windfall on the holders of existing leases. These are cogent reasons for seeking a careful exer- cise of the Secretary's expert judgment before deciding the interpretive issue presented here. lJdall v. Tallman, 380 U.S. 1, 16-18 (1965); }rlcLaren v. Fleischer, 256 U.S. 477, .,r tory shows that Congress intended "conservation" to be inter- preted far more broadly in th~ OCS Lands Act than it was in the Mineral Leasing Act. Suspension of Operations on Oil and Gas Leases, 78 I.D. 256, 258-60 (1971) (Opinion of Interior Dept. Solicitor). Congress used "conservation" differently in § 209. 'The Secretary's statute of limitations argument assumes that Copper Valley was not entitled to a mandatory extension under § 209, and so assumed his conclusion to the issue in dispute here. The Secretary's argument concerning his discre- tion to deny a permit to a dilatory driller ignores the mandatory language of the statute. Moreover, in 1935, when Congress abolished the system of prospecting permits and replaced it with noncompetitive leases, like the one involved here, it made previously discretionary extensions, for holders of prospecting permits mandatory for the leaseholders. Mineral Leasing Act Amendments of 1935, § 17, 49 Stat. 677, ch. 599 (1935). . _. ........_~___.__.___ _----..._________~........-....--..- ._fIlI'Y'- -...........................-..-~-......, ~-...~...:,.-~ ~......".......~-~'" .. .. ....-..,¡.~~___" _ ..... J.'. .. _ ".'.. '. _..' .......~._...,;.,__. _ ~_+.. .,__ ........-.--...-..~.... . ~-. ._ ~ .. __. _._ . "' _.. ~_ __ ~ '. ..._~ .~-""-- l~' 5 481 (1921). By pronouncing a flat rule before the Secretary has acted, we may significantly impede Alaskan oil develop- ment vit.a] to meeting the Nation's current and future ener- gy needs. I doubt Congress intended that result. .__....._.-.q"~..._--.tI!f!'...~........,...._1',..-..~-,..,.___..,. "'__~_~_"'''_~'___''';'_. ...;..,._.~_.~_ _._. _..............__~__._ _ .. _ __ .... __" Routing MS O/Div. Chief 600 - Chief -::z:.. Asooc. Q11ef Asst. for Mgt. -Staff Asst. -Pub. Inq. Officer --O:>rres¡x>Ddence Review ~1~.~._JfiS~..::&:~~ ~/~- .' . AOC Prograrœ - Envir. Sec. -Progrwœ -ADP ~ARA -ESP Ct)8d) ...:l::....AOC ~ratiODS _Mining Marine CUi --CÀ1SbOre œ.G Roy. Acctg. AOC Res. Eval. - <Ã1ShOre -Marine B/M & Ie _Aànin. _Gen. Services Q&..-G(),{ -eM-WR -Qd-Œ a&-ER 600 630 620 622 621 640 610 650 Oct. 1918 * Canœnts J / 1/ - 01, !Þ~IA SSI!' / w/ BjNr, ßo.....~ - Po , ."" fr (,v " 5 c-vS' ,;... ~ e,j, 'fe/ ý IL.:J ~~ ~_h--.J to ß ~ - W-t: "2./ ý~ ÜA- (£...,,;;:/ ;... 14.- tY1 f ,,/ ~. A If. wi$ k þ~ Ce-,It!hJ ( >"'b¿'J ¡C.~ ¡:¡~ ct,.. A. /) I¿ I~~ * Disposition Oxle I - Infonnation A - Action C - Coorœnt E - Edit F - File CR - O:>ordination Required æ - Copy Direct <, \,"ie have included 1 for j1()ur ntltari2-ed affi<?'lavit on tt!e' materi¡~l V{)U l:)t:"()vif3ed t:his office in t.o the Actincl Chief t Conservatit)o D1 vI!;!; ic,f' t s t'eqUf.'~t to 3fOU of Plu~ revia¡ t.h¡at affidavit to ~S8ure that it is correct~ adð1titm;...··~ vlould like you to ad:~>L>iti~.';;ilablel a~"more r~nt dri.llintJ . . for:' the éU:.'Cii. Alt.1O inclOOe, if· t.l"Ue I a sta~nt b') the effect~_~1¡I1t:_t,he if1J2QflitiQrL~~.!<~ter-only «tllinq, stiJ;;ulatioo on all. r~~!!.i~~~ \lal1 ejr ~'1chin~ tliJod<s Di.5txict Court for the District ú'f pt>oper ly in deny'ÍI'1(j i ts requ{~st for operatia1S l\-G63937.. Cq'F;'et' Vall~yrJ¡achine Wot'k.ët;tlnc. v. Ar.ðrœ, C1\1. (D. D.C., ~Juœ~~29 1979):'"" Iñi,ts brief·oo·ar~al, a'1~r th.iJt y()urrf!C()ft~(~n(intion again.'St: s\1Spenl;iorl for \Jalle'\! hf"tC1 sufficient tL~ to (11"'111 r'r(X~uction is unsupported by ~: recot"(i ·~·lOuld llk..e t.o CCjunt~::r this arqut~nt: thf;~ of y()U~' affidlHlit on that r:i€-:!'lt' r"¡l'. Stli th i ne~; ì'~r.. F:odney .~e Smith ,~:rea Oi 1 And C<t"iE 8tr£)f~1"vi.OC)1;~ flAtt t3treetJl Suite 109 l\nchor~qe, ,fùaska 99501 p[1JeRAI.¡ ~, UNITED STATES DEPARTMENT OF THE INTERIOR OFFICE OF THE SOLICITOR WASHINGTON. D.C. 20240 cc z l u.s. CÆ(oloc?ical. s~r~ay fI Conservat1on D1V1S1OO t'/Jr:. "Jerry ..Jack:son ~pðrtr^*.,nt of lJustice, mom 2335 EnclolBur.ü J'ohn D., Le~hY' $1"1'1(: {Jovcrnrænt' s response bri~)f is In order to r:1al"~e that deadlin(Ð f your you ha'l(~ any CHlestiol1S on t.hf? prep~r~ti:on. cont,~ct K~~n.neth I:e~~ eFTS 343-lt8(3), AFFIDAVIT OF RODNEY A. SMITH State of Alaska ~::~b of ) ) ) SS: RODNEY A. SMITH, being first duly sworn, deposes and says: 1. That I am the Alaska Area Oil and Gas Supervisor for the United States Geological Survey. I am familiar with the federal oil and gas leasing program, the statutes and federal regulations governing such program, the reporting and administrative procedures of the USGS, and the compilation and maintenance of those reports. In particular I am familiar with the reports made by Copper Valley Machine Works, Inc. concerning its Alicia Well No.1, Lease A-063937. The matters related in this affidavit are based on my personal knowledge. 2. One of the major responsibilities of the USGS is the regulation of industry operations on oil and gas leases issued pursuant to the Mineral Leasing Act of 1920, 30 U.S.C. Section 181 et seq., the Mineral Leasing Act for Acquired Lands, 30 U.S.C. Sections 351-359, and the Outer Continental ii' f ~ t Shelf Lands Act of 1953, 43 U.S~C. Section 1331, et seq. One function involved in the regulation program is the monitoring of activities on leaseholds to determine if a lL lease should be recommended for a two-year extension under the provisions of Section l7(e) of the Mineral Leasing Act, 30 U.S.C. I - 2 - Section 226(e). A second function is to determine and re- commend to the Secretary of the Interior when the prevailing circumstances are such that a lessee may be entitled to a suspension of operations and production pursuant to Section 39 of the Mineral Leasing Act, 30 U.S.C. Section 209. 3. I recommended to the Secretary of the Interior that Copper Valley's application for suspension of operations / -. ~ and production under Section 209 be denied primarily because in my opinion Copper Valley had been accorded sufficient time in which to have drilled and completed for production several wells on the lease. My opinion was based on the type of equip- ment being employed by Copper Valley, the geologic formation targeted for drilling and the drilling activities of other, similarly situated lessees. 4. Copper Valley indicated in its Application for Permi t to Drill ("APD'L..-Administrative Record, Exhibit F) that :1 it would use a "mobil [sic] rotary rig for drilling to 1500 feet." The APD also discloses that Copper Valley intended to i: t ¡ \ ¡ drill to a depth of 1400 feet or at least 300 feet into the Cretaceous geologic formation. \f - 5. The Cretaceous geologic formations in the drill site area are considered to be prospectively valuable for the production of oil and gas in paying quantities. ~"''' / /3- ~- 6. USGS~::~does not recommend that a lease be extended for two years unless the lessee or operator has drilled to an objective formation that is considered to be prospectively productive, thus establishing diligent drilling. The fact that the lessee or operator has reached the objective horizon is substantiated by examination of electric logs and other data that the lessee or operator is required to maintain and supply to USGS. 7. By letter of April 28, 1977 (Exhibit P), USGS notified the BLM that Copper Valley had drilled a well with a total depth of 1070 feet bottoming in the Cretaceous for- mation. Since the objective horizon had been reached, USGS recommended that the lease be extended for two years because of Copper Valley's sati~faction of the diligent drilling requirement. 8. In reviewing Copper Valley's application for suspension of operations, USGS had in its files the drilling records of several lessees in the general vicinity showing the length of time necessary to drill in similar circumstances. They. ~reas follows: (a) At Rainbow Federal #2 well, 28 miles to the north of Copper Valley's drill site, Atlantic Refining Company drilled to a depth of 2793 feet - 4 - in twelve days from January 12, 1966 to January 24, 1966. That well was plugged and i - ~ t ~ abandoned on January 26, 1966. (b) At Rainbow Federal #1 well, 24 miles to north-north-west of Copper Valley's drill site, Atlantic Refining Company drilled to a depth of 3000 feet in 14 days from December 5, 1965 to December 19, 1965. That well was plugged and abandoned on December 21, 1965. (c) At Salmon Berry Lake Unit #1 well, 16 miles to the northwest of Copper Valley's drill site, Mobil Oil Company drilled to a depth of 1636 feet in 15 days from January 1, 1964 to January 15, 1964. That well was plugged and abandoned on March 18, 1964, after reaching a total depth of 7913 feet. (d) At Tazlina Unit #1 well, 20 miles west of ~) Copper Valley's drill site, Union Oil Company drilled to a depth of 1174 feet in 14 days from July 26,196~ ( to August 9, 1962. That well was plugged and abàn- doned on October 29, 1962 after reaching a depth of 8837 feet. ; I (e) At Tawawe Lake Unit #1 well, 24 miles west of Copper Valley's drill site, Consolidated Oil and - 5 - Gas drilled a well to a depth of' 1540 feet in 1 t 34 days from October 28, 1969 to November 30, 1969. That well was plugged and abandoned on January 17, 1970 after reaching a total depth of 6721 feet. (f) At Eureka #2 well, 43 miles west-south- west of Copper Valley's drill site, Aledo Oil Company drilled a well to a depth of 4460 feet in ~ 30 days from November 1, 1962 to December 1, 1962. ø That well was plugged and abandoned on AprilS, 1963 after reaching a depth of 8546 feet. (g) At Moose Creek Unit #1 well, 4 miles east of Copper Valley's drill site, Pan American Petroleum Corporation drilled a well to a depth of 1502 feet in 47 days from February 10, 1963 to March 26, 1963. That well was plugged and abandoned on July ~~, 1963 after reaching a depth of 7869 feet. 9. The chronological record of Copper Valley's 1 , ! 1 activities (see Exhibit S) discloses that it was afforded access to the drill site from the end of January 1976 to May 21, 1976, ~~o~t~ from November 1, 1976 tOJ\APril 15, 1977, and from about November 15, 1977 to the end of the lease term on January 31, 1978. Thus Copper Valley had access to the drill site ~ .. \ ~ ~ ..?-,. ill 1 1 \ - 6 - for approximately 12 months of its 24 month extended lease term. 10. A comparison of the drilling activities of other lessees and operators in the same general vicinity, many of whom conducted their drilling operations during the winter months, indicated that wells to the depth targeted by Copper Valley could be drilled in periods of 14 to 45 days. Copper Valley could have, from a technological point of view, drilled several wells in the 12 ~months in which it had access to its drill site. ~ 11. MY~ opinion that Copper Valley was afforded sufficient time in which to drill several wells capable of production was based on my knowledge of the technological capabilities of the industry for winter drilling in the general area and on the history of other similarly situated operators. 12. On the basis of this opinion, coupled with the fact that Copper Valley made no objection to the winter-only access stipulation until 11 days before the end of its extended lease term, I recommended to the Acting Chief of the USGS's J T r ~,.. '1 ~ ~ l ! i l ~ ( t - t f r ~ t - 7 - Conservation Division that Copper Valley's application for a suspension of operations and production be denied. RODNEY A. SMITH Oil and Gas Supervisor Alaska Area united States Geological Survey Department of the Interior Subscribed and sworn to before me this day of Januar~ 1980 Notary Public in and for the State of Alaska My commission expires ?tj, -f. .:: -~~ i ~~~. L,¿,rz.,·r( ~ ~.r~L7-,>." ../1V'1-" ç?, ~ f"/ Y L<....... ~ ~~~)(~=- ,L~~ ./>C.if~-¡:· .0--', ~..<- ~ It /V/"'LI ,,' L-v}--~ ~- ¡ ./ / I / .I - UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA COPPER VALLEY MACHINE WORKS, INC. Plaintiff I v. Civil Action No. 78-1572 CECIL D. ANDRUS, et al Defendants L"-ILED JUh :: ~ _ ORDER JA~,~ES f. DA',':\" c;~··: Upon consideration of plaintiff's motion for summary judgment and defendants' motion for summary judgment, it is by the Court this 29th day of June 1979, ORDERED that plaintiff's motion for summary judgment is denied; and it is further ORDERED that defendants' motion for summary judgment is' hereby granted; and it is further ORDERED that the instant action is dismissed. '~A' f7 ) ..-/~ JUNE L.. GREEN U.S. District Judgè "" ) ..I -- ""1"\ L .\ . n ~. ~ /-'? a 1-" I ._~.__7_~.~_~~_*'1-_~.~~' j·~~'d··¡'·1. ..\ ~. r. - - .: I'.', 1 ~ ;,- - L. l ".-. ! ,......, i ¡ ." ì· \ t r" ~, -,~.' ! V \ 110 \.' l¿ 111 - ! i _~!: '~,r~ ;'-f;~ ':' .~~¡:¡;3.~;;&\ I l (n·.\·, T...:...,! ì 1~1 -. ~l Ì-r-:' ~.~_,~~-:':':~~~VT i t..~·, f .}f . . UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA COPPER VALLEY MACHINE WORKS, INC. / Plaintiff v. Civil Action No. 78-1572 CECIL D. ANDRUS, et al Defendants .= I LED JUk .: ~ S'9 MEMORANDUM OPINION JA~.~ES f. DJ.::::r. C;~:-'~ Introduction This matter is before the Court on cross-motions for summary judgment. Upon consideration of these motions, memoranda in support thereof and the entire record, the Court concludes that there are no genuine issues of material fact and that defendants are entitled to judgment as a matter of law. -....,.;:.:"-,~...,- ,=".-":':~-..,=^-,.~ Plaintiff, Copper Valley Machine Works, Inc. (hereinafter "Copper Valley"), as designated operator, is before the Court seek- ing an order directing the Secretary of the Interior to extend by one year the term of non-competitive Oil and Gas Lease No. A-063937. This lease was originally issued to Edward M. Devine on February 1, 1966 for a primary term of ten years pursuant to 30 V.S.C. § 226(e). Copper Valley applied for a permit to drill an exploratory well on Lease A-063937 on January 19, 1976. The permit was issued by the United States Geological Service (herinafter "USGS") on Janu- ary 30, 1976, subject to the conditions that drilling operations . be conducted during the winter season only and that the access trails could not be used during the period of April 15 through November 15 unless the Bureau of Land Management gave its approval. Copper Valley made no objection to these conditions and co~~enced I drilling on January 31, 1976, the last day of the primary lease. Lease A-063937 was extended for two years from January 31, 1976, pursuant to 30 D.S.C. § 226{e) and 43 C.F.R. § 3107.2-3 because USGS found on April 28, 1977, that diligent drilling opera- tions were being conducted on the leasehold at the time the primary term of the lease ended. On January 20, 1978, Copper Valley wrote to USGS stating that its operations had been suspended by order of the United States Government for a total of twelve months during the two-year lease 1,'. extension, and requesting that its lease be extended to allow twelve additional months of operations to compensate for the two periods of summer shutdown in 1976 and 1977. On May 22, 1978, the Secretary of the Interior denied what he construed to be a requested 12-month suspension of operations and 1/ production for the lease pursuant to 43 C.F.R. § 3103.3-8: On July 17, 1978, the Acting Oil and Gas Supervisor, Alaska Area, informed Copper Valley of the Secretary's denial of its request, and on August 18, 1977, Copper Valley filed this lawsuit complaining ~ that the Secretary's denial was unlawful and praying for a declaratory judgment and mandamus to the Secretary, ordering that Copper Valley be permitted to conduct operations on the lease to compensaœfor the twelve months of the lease term during which operations were interrupted. Discussion The core of this matter is whether the winter-only operating r~triction on Copper Valley's drilling permit constituted a "sus- pension of operatbns and production" under the lease within the meaning of 30 U.S.C. § 209 as argued by plaintiff~ thereby entitling it to a mandatory compensating extension, or whether the restriction 1/ By letter of February 28, 1978, the USGS informed Copper Valley that because oil and gas in paying quantities had not been estab- lished prior to January 31, 1978, the date ending the two-year extension, the lease expired by operation of law on that date. For that reason, USGS treated this request as an application for suspen- sion of operation pursuant to 43 C.F.R. § 3103.3-8. -2- was a condition imposed by the drilling permit and incorporated into the lease so that the Secretary had the authority to deny properly the request under 43 C.F.R. § 3l03.3-8(a) because plain- tiff had not established a well capable of production on the lease- 2/ hOld.- In support of its position that the winter-only restriction constituted a "suspension of operations and production," plaintiff argues that its original lease contained no winter-only restriction, and that its extension entitled it to an additional two years of the full enjoyment of the rights contained in the lease. The Court, however, concludes that all provisionsof the drilling permit, which was issued during the primary term of the lease, were incorporated into the lease. Plaintiff has cited no authority which convinces this Court otherwise. These winter access conditions were designed to protect the surfacè environment and prevent pollution. They were imposed as part of the Secretary's approval of the permit to drill. 3/ They were agreed to by plaintiff.- They could have been imposed at any time the lease operator applied for a drilling permit. That the Secretary has the authority and responsibility to protect the environment of public lands within federal oil and gas leases is beyond dispute. This Circuit recognized that responsibility in California Company v. Udall, 296 F.2d 384 (1961), holding that under the Mineral Leasing Act, the Secretary of the Interior has a responsibility to insure that these resources are not physically wasted and that their extraction accords with prudent principles of conservation. At 388. That the Secretary may impose restrictions on lease terms in ful- fillment of this responsibility is also settled. As stated by 2/ The last sentence of 43 C.F.R. § 3103.3-8(a) directs that the burden of showing the necessity in the interest of conserva- tion for the relief afforded by that regulation was on the plaintiff. Plaintiff has made no such showing, and it is there- fore stripped of any argument that the Secretary's denial was arbitrary and capricious. 3/ Under 30 U.S.C. § 209, a lessee need not pay acreage rental during the period of suspension of operations and production. Plaintiff continued to pay rentals under the lease without protest. -3- this Court in Natural Resources Defense Council v. Berk1und, 458 F.Supp. 925 (1978) t The Secretary has the discretion to incorporate general standards into the lease which are aimed at ameliorating environmental damage but which may not be susceptible to valuation as costs to the permittee. The Court finds that the Secretary reserved the right to exercise this discretion in § 4 of plaintiff's lease, which in pertinent if part, is set forth in the margin. The Court notes that the legislative history of 30 V.S.C. § 209 indicates that Congress was principally concerned with extraordinary situations where the Secretary orders the suspension of drilling to the surprise of the lessee in order to conserve oil and gas or where the lessee requested and the Secretary assented to a suspension. See H.R. Rep. No. 1317, 79th Cong., 1st Sess. (June 30, 1932) p. 3 and 76 Cong.Rec. and 705 (Dec. 19, 1932). Copper Valley's reliance on Gulf Oil Corp. v. Morton, 493 F.2d 141 (1973) and Union Oil Company of California v. Morton, 512 F.2d 743 (1975) is misplaced. Both cases dealt with a direct sus- pension order by the Secretary under 43 V.S.C. 1331, et ~. of operations in the Santa Barbara Channel after a dangerous oil spill. ~ose cases involved direct secretarial action to tQiti~ate an. u~_pe c.te~_,~v~l1 t , ~o ar~_p~qp~_!:.~Y_.!-"~Em~?._:'..:~,~~:~_s ~on~.~~<?p=--~ a t~~ s \:.d production" within 30 U.S.C. § 209. In view of the Court's conclusion that the winter-only restriction was a condition imposed on the lease, the Court directs its attention to the pertinent administrative and judicial review 4/ nIt is agreed that the rate of prospecting and developing and the quality and rate of production from the lands covered by this lease shall be subject to control in the public interest by the Secretary of the Interior, and in the exercise of his judgment the Secretary may take into consideration, among other things, Federal laws, State laws, and Regulations issued thereunder. . .n -4- qJ t. ...IÌ¡' . L·t I/~' " oJ j/~ provisions of the u.s. Code and the Code õf Federal Regulations. Under 30 C.F.R. S 221.21, the Area Oil and Gas Supervisor has been dele- gated authori ty. for reviewing and approving plans related to an oil and gas lessee's application for a permit to drill on the leasehold. On January 30, 1976, the USGS approved plaintiff's application to drill subject to the "winter only" operation restric- tions. Plaintiff never sought administrative review of this \ } restriction pursuant to the prescribed procedure in 30 C.F.R. § 290. / Such a review procedure has been set up to lead to a final secre- tarial decision and trigger the ninety-day statutory judicial review pro cedure set forth in 30 U.S.C. § 226-2. 30 U.S.C. § 226-2 refers to "contesting a decision of the Secretary. involving any oil and gas lease." The Court finds that the imposition of the drilling restriction at bar falls within that language. The courts have treated this limitation on review very strictly and have indicated that judicial review of a final secretrial decision dealing with an oil or gas lease must be brought within ninety days of the decision or final disposition of an administrative appeal or be barred as untimely. King v. Udall, 266 F . Supp . 747 (D. C . D. C. 1967). The Secretary's power to promulgate rules setting time limits for administrative review so that the statute of limitations may run has also been upheld. Tallman v. Udall, 324 F.2d 41 (D.C. Cir. 1963}r rev 'd. on other grounds, 380 U.S. 1 (1969). In accordance with the above, plaintiff's motion for summary judgment is denied, defendants' motion for summary judgment is granted, and the case is dismissed. An appropriate order is entered herewith. C \ L '_, ~ )- JUNE L. GRE~ U.S. District ~udge .' Dated: June 29, 1979 ... On January 20 I 1978, Copper Valley wrote to tJ~1I) }3tating ~t its opera- tions had in effect been sus¡;,endeå for a. totE41 ~f¡~'t\!~~ing the two-year lea.se extension. Copper Valley t;eQUested, tha be; extenðeð to allow tælve additional montbs of operation t.o ~1r the two periods of summer shutdCM'J in 19T6 anmp%~ ja.~a t 1 ¡ n"<¡;'?, Plaintiff, Copper Valley M,æchine tlarks, Inc. ("Copper Valley") aOL1ÇJht an order ðirecting the secretary to e~t.eoo by 000 y(t8I' the term of its non-competitive oil and gas lease. On January 19, 1976, prior to the January 31, 1976 expiration of the primary t.erm of the lease, C&~r Valley appl ied for a permit to drill an tl:xploratory W$llon the lease tract. The permit was issued by the u.s. Geologiœl Survey (hereinafter "USGS") on January 30, 1976, subject to the coooitions that: drilling operations be conducted during the winte( season only a1'k~ that the access trails could not be used duríng the period of April 15 through ~iovemœr 15 unless the Bureau of. Land Ml'U'ager~rlt gave its approvl11. Copper Va.lley made no objection to these contjitions and. ~nceddrillinq on January 31, 1976, the last day of the prL"'rary term of the leee. 1be lease term was extended for t\«) years § 3107.2-3 because USGS founð on April 28, 1977, that diligent drilling operations were beir~ conducted on the lease- hold at the tL1fie the pr~ry term of th-e lease ended. 30 U.S.C. S 226(e) and 43 CFR 3107.2-3. On June 29, 1979, the u.s. District Court for the Dist.rict: of Columbia granted our motion for summary judgment and dismissed the plaintiff's çJ:.;tion. çq~r V~ll~ey~ ~J.~~~ve, tl9r~!c,Ir;Ç,!.,\'1! ÞDÇ1rµs, Chðllenç;se to Hinter-Use~nly Stipulation .- . - Subject: ~\ssistant Solicitor, Onshore Minerals Division of Energy and Resourœ~ From: Assistant Secretary, Energy and ~1inerals Assistant Secretary, land and t<1ater 'Resources 1ro: f'ie:mor andum JUl 1 9 1979 ~< r;..~ UNITED STATES DEPARTMENT OF THE INTERIOR OFFICE OF THE SOLICITOR WASHINGTON. D.C. 20240 cc: \Director, USGS 1.J1recfff, ELM B~BERf URAM .Robert As ðn adr1itlonal bar to plaintiff's actlon, the court. that plaint:tff fedled to seek administ,r.ative review of the w1nter....only re$trlatiol1, to seek jud iciðl review wi thi~ 90 (lays of its imposition as by 30 u.s.c. § 226-2. The court faunð plaIntiff' $ position unccJmp~11in\1. It that, the wint.er. access conditions were desi9œ(:l to prot~t, thG surf&c~ envirørJftent and to prevent pollution, that they ~re imp08(:~~S of the Secretary's a~,,-proval of the permit to drill, that tbey ~re agteOO to by plftìlntiff, and t.l1at they could have baen L~ed at tm<e t.he O~tator applied for a drilling fermit, not j1.1St; ~s a cCl1<iition 00 ~ . As well, the court recognized the cleat aut.'horlty the secretary t.O protect the envirOPJ'ßent. of public 1~nd~'¥'·d:th1n oil and qaa leaseÐ. .1.\.ccorði.nçly, tbe court confirmed that acts reasonably ~;hen. h~ impoœ~ soohrest.rictio1't$on lea. to th~t auth.orit.y. We [;trçmed tÞßt thø r.estriction was a conãit.ion ifnposro by drilling permit and incorporarl:.ed in the lease, so that the Secret~ty retaimd the authority to derry thecequest to the leasfJ: tU'¥~er 43 S 3103.3-8(a), l:~cause plaintiff bad oot.Et$teblished a well c~pabl~ proouctj,on on the leaßehold. Tne l@~s:e than e:N.pired~t the erlQ of its twe lith year. The plaintiff's position hi court ~làS that winter or.<.ly restriction. on its drilling 1~r~it constituted a ~sus~nsion of and procluctiontt under the ieã,se within the of"" 30 U.S.C. §; ;.; .. ~ .- . ., -.. - ;..,.<- theret.)}l entitlinq it to a roandatory e~tensic,m le&~e a~le durat:i.on. as the access probibit.ion. plaint.iff arQued t~t ltaotigin.al lease contained no wintêr-only restrict.ion t.hat. its e}{ten81on"ent.itJ.ed it to an additional 'two years the full enjoyment of right$ under tile lease. '1111s r(~est \:vas denied by the secretary on Ji,ugust 18, 1917, lawsuit. W$.S filed cQrplaining t11€!it Se~retary's denial W&~ unlðwful and praying for the court toor~.er th(it Copr~r valley be f;~rmitt.ed to operate the lease for a periO<:1 equ$l to the tl'4eJ.ve extension duri.ng \'\1hich operlttiorU5 wera prohibite<1.' -2- UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIÁ COPPER VALLEY R~CHINE WORKS, INC. t/ Plaintiff v. Civil Action No. 78-1572 CECIL D. ANDRUS, et al Defendants '.: I LED JUÑ': ~ &9 MEMORANDUM OPINION Introduction JA~r~ES F. Ol-.':=:r. c:~~·~ This matter is before the Court on cross-motions for summary judgment. Upon consideration of these motions, memoranda in support thereof and the entire record, the Court concludes that there are no genuine issues of material fact and that defendants are entitled to judgment as a matter of law. -~.~~~~....-- Plaintiff, Copper Valley Machine Works, Inc. (hèreinafter "Copper Valley"), as designated operator, is before the Court seek- ing an order directing the Secretary of the Interior to extend by one year the term of non-competitive Oil and Gas Lease No. A-063937. This lease was originally issued to Edward M. Devine on February 1, 1966 for a primary term of ten years pursuant to 30 U.S.C. S 226(e). Copper Valley applied for a permit to drill an exploratory well on Lease A-063937 on January 19, 1976. The permit was issued by the United States Geological Service (herinafter "USGS") on Janu- ary 30, 1976, subject to the conditions that drilling operations be conducted during the winter season only and that the access trails could not be used during the period of April 15 through November 15 unless the Bureau of Land Management gave its approval. Copper Valley made no objection to these conditions and co~menced a drilling on January 31, 1976, the last day of the primary lease. Lease A-063937 was extended for two years from January 31, 1976, pursuant to 30 U.S.C. S 226(e) and 43 C.F.R. § 3107.2-3 because USGS found on April 28, 1977, that diligent drilling opera- tions were being conducted on the leasehold at the time the primary term of the lease end~d. On January 20, 1978, Copper Valley wrote to USGS stating that its operations had been suspended by order of the United States Government for a total of twelve months during the two-year lease extension, and requesting that its lease be extended to allow twelve additional months of operations to compensate for the two periods of summer shutdown in 1976 and 1977. On May 22, 1978, the Secretary of the Interior denied what he construed to be a requested l2-month suspension of operations and 1/ production for the lease pursuant to 43 C.F.R. § 3l03.3-8~ On July 17, 1978, the Acting Oil and Gas Supervisor, Alaska Area, informed Copper Valley of the Secretary's denial of its request, and on August 18, 1977, Copper Valley filed this lawsuit complaining that the Secretary's denial was unla~ful and praying for a declaratory judgment and Mandamus to the Secretary, ordering that Copper Valley be permitted to conduct operations on the lease to compensaœfor the twelve months of the lease term during which operations were interrupted. Discussion The core of this matter is whether the winter-only operating r~triction on Copper Valley's drilling permit constituted a "sus- pension of operatDDs and production" under the lease within the meaning of 30 U.S.C. § 209 as argued by plaintiffÞ thereby entitling it to a mandatory compensating extension, or whether the restriction 1/ By letter of February 28, 1978, the USGS informed Copper Valley that because oil and gas in paying quantities had not been estab- lished prior to January 31, 1978, the date ending the two-year extension, the lease expired by operation of law on that date. For that reason, USGS treated this request as an application for suspen- sion of operation pursuant to 43 C.F.R. S 3103.3-8. -2- was a condition imposed by the drilling permit and incorporated into the lease so that the Secretary had the authority to deny properly the request under 43 C.F.R. § 3103.3-8(a) because plain- tiff had not established a well capable of production on the lease- 2/ ho1d.- In support of its position that the winter-only restriction constituted a "suspension of operations and production," plaintiff argues that its original lease contained no winter-only restriction, and that its extension entitled it to an additional two years of the full enjoyment of the rights contained in the lease. The Court, however, concludes that all provisionsof the drilling permit, which was issued during the primary term of the lease, were incorporated into the lease. Plaintiff has cited no authority which convinces this Court otherwise. These winter access conditions were designed to protect the surfacè environment and prevent pollution. They were imposed as part of the Secretary's approval of the permit to drill. 3/ They were agreed to by p1aintiff.- They could have bee~ imposed at any time the lease operator applied for a drilling permit. That the Secretary has the authority and responsibility to protect the environment of public lands within federal oil and gas leases is beyond dispute. This Circuit recognized that responsibility in California Company v. Udall, 296 F.2d 384 (1961), holding that under the Mineral Leasing Act, the Secretary of the Interior has a responsibility to insure that these resources are not physically wasted and that their extraction accords with prudent principles of conservation. At 388. That the Secretary may impose restrictions on lease terms in ful- fillment of this responsibility is also settled. As stated by 2/ The last sentence of 43 C.F.R. S 3103.3-8(a) directs that the burden of showing the necessity in the interest of conserva- tion for the relief afforded by that regulation was on the plaintiff. Plaintiff has made no such showing, and it is there- fore stripped of any argument that the Secretary's denial was arbitrary and capricious. 3/ Under 30 U.S.C. S 209, a lessee need not pay acreage rental during the period of suspension of operations and production. Plaintiff continued to pay rentals under the lease without protest. -3- this Court in Natural Resources Defense Council v. Berk1und, 458 F.Supp. 925 (1978), The Secretary has the discretion to incorporate general standards into the lease which are aimed at ameliorating environmental damage but which may not be susceptible to valuation as costs to the permittee. The Court finds that the Secretary reserved the right to exercise this discretion in § 4 of plaintiff's lease, which in pertinent 4/ part, is set forth in the margin.- The Court notes that the legislative history of 30 U.S.C. § 209 indicates that Congress was principally concerned with extraordinary situations where the Secretary orders the suspension of drilling to the surprise of the lessee in order to conserve oil and gas or where the lessee requested and the Secretary assented to a suspension. See H.R. Rep. No. 1317, 79th Cong., 1st Sess. (June 30, 1932) p. 3 and 76 Cong.Rec. and 705 (Dec. 19, 1932). Copper Valley's reliance on Gulf Oil Corp. v. Morton, 493 F.2d 141 (1973) and Union Oil Company of California v. Morton, 512 F.2d 743 (1975) is misplaced. Both cases dealt with a direct sus- pension order by the Secretary under 43 U.S.C. 1331, et ~. of operations in the Santa Barbara Channel after a dangerous oil spill. ~ose cases involved direct secretarial action to ~iti9ate an. unexpected ev~t, so ar~. properly te.rm~d "s-uspension of operations \:.d producti~n" within 30 V.S.C. § 209. In Vlew of the Court's conclusion that the winter-only restriction was a condition imposed on the lease, the Court directs its attention to the pertinent administrative and judicial review 4/ "It is agreed that the rate of prospecting and developing and the quality and rate of production from the lands covered by this lease shall be subject to control in the public interest by the Secretary of the Interior, and in the exercise of his judgment the Secretary may take into consideration, among other things, Federal laws, State laws, and Regulations issued thereunder. . ." -4- qJ r/ I . ;1 ,;/ I' )./ ./ provisions of the U.S. Code and the Codè õf Federal Regulations. Under 30 C.F.R. S 221.21, the Area Oil and Gas Supervisor has been dele- gated authorit~ for reviewing and approving plans related to an oil and gas lessee's application for a permit to drill on the leasehold. On January 30, 1976, the USGS approved plaintiff's application to drill subject to the "winter only" operation restric- tions. Plaintiff never sought administrative review of this restriction pursuant to the prescribed procedure in 30 C.F.R. § 290. Such a review procedure has been set up to lead to a final secre- tarial decision and trigger the ninety-day statutory judicial ~eview pro cedure set forth in 30 U.S.C. § 226-2. 30 U.S.C. § 226-2 refers to "contesting a decision of the Secretary. involving any oil and gas lease." The Court finds that the imposition of the drilling restriction at bar falls within that language. The courts have treated this limitation on review very strictly and have indicated that judicial review of a final secretrial decision dealing with an oil or gas lease must be brought within ninety days of the decision or final disposition of an administrative appeal or be barred as untimely. King v. Udall, 266 F.Supp. 747 (D.C.D.C. 1967). The Secretary's power to promulgate rules setting time limits for administrative review so that the statute of limitations may run has also been upheld. Tallman v. Udall, 324 F.2d 41 (D.C. Cir. 1963), rev'd. on other grounds, 380 U.S. 1 (1969). In accordance with the above, plaintiff's motion for summary judgment is denied, defendants' motion for summary judgment is granted, and the case is dismissed. An appropriate order is entered herewith. } 1),- \ .Â. ..~-' ", -~~ ./ JUNE L. GREE..'J U.S. District ;udge c . Dated: June 29, 1979 I / / / ", t _ t,__ i ¡ / / - UNITED STATES DISTRICT 'COURT FOR THE DISrRICT OF COLUMBIA COPPER VALLEY MACHINE WORKS, INC. Plaintiff / v. Civil Action No. 78-1572 CECIL D. ANDRUS, et a1 Defendants "-'LED JUh :: ~ ~ ORDER JA~,~ES F, CA',':'.'. C:;;": Upon consideration of plaintiff's motion for summary judgment and defendants' motion for summary judgment, it is by the Court this 29th day of June 1979, ORDERED that plaintiff's motion for summary judgment is denied: and it is further ORDERED that defendants' motion for summary judgment is hereby granted; and it is further ORDERED that the instant action is dismissed. ~AU7 .~ '; JUNE L. GREEN ~, U.S. District Judg~ - ...." ! 1 . ..~C¡Ó ../-/t~ /531;, , . .: .I! j.'. I.: \ ~ \ 13 ¡ 0 I" ¡ 11! ; __.... ~. :.-.:.: ;',: ;.:: ;.l~·1 ~. .~~~\ ¡ l··(l-¡·-·.,....:,'··.··, ~l 1__ ~_. :....:.1-~ UtH L'- , " '- . - - .~""",__.,._-~._~.-""""---'-. ... ~ \ ~ ';2,/>/') q . .\. / / . :~, 0,., D · ......--.---....-...--.-.-...--....--.. -.._------- .--' .._-~ :=~-=~---....t-.. ~--G.~--I~I.).·..·=~=:~-;=:-~~·-,;:--"^;;6· ... . ---í-" ¡ fi.,t.A,J...'1.1s1"J ~J ....... ~,,-~iL. -~~...,_~ø\.~_..:.~..\ OIAi\ -~-.-~~---.-----~ tM\\tJ,,"_A~~,\\J~.___.~_~~_~~~ffi~~_-h~__J..,,... ._.Çf_~~__. ..___ . 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L H.c.' ~ure..t'4.., ,-.-....__:-_...--.----;-.--j....;)~c:.c..-TW.-.. ........... . . ~ .. .. . ....,.. -~~--"~_'" ....---.--------If·J -~-------- ~--~-\t,~--~-~t,~·,-.-'~f.cl--.~.k.----~>.tt...~ -"'~___~ ~ J '4.~.,____~ '-~v /øhA/,.þJ /0-2-78 /1):)"11 JJ {O/~/1( In Reply Refer To: EGS-Mail Stop 620 OCT 3 '&78 Memorandum To: Area Oil and Gas Supervisor, Alaska' Through: Conservation Manager - Western Region Assistant Conservation Manager, Alaska Area From: Acting Chief, Conservation Division Subject: Copper Valley Machine Works Inc. vs. Andrus, Civ. No. 78-1572 Enclosed is a copy of a memorandum from the Assistant Solicitor, Onshore Minerals, requesting documentation of the two reasons given in the denial by the Secretary on May 22, 1978, of Copper Valley's request for suspension of operations and production for lease Anchorage 063937. Please document the necessary information show- ing that Copper Valley (1) was aware of the winter-drilling-~nly requirement from the commencement of its extension by drilling and made no complaint until 11 days prior to lease termination and (2) was accorded sufficient time, in the Survey's opinion, in which to have drilled and completed for production several wells on the lease. () tJ2a1n ¡f:J 11. \ "'.".;.);7 1.'.1 U !j ~"~'¢:;-~r Acting Chief, Conservation Division Enclosure cc: ~File (BOOGO) CM-WR Asst. Cons. Man.-Alaska Area OS&D Section Desk Files (ADC-O)(BOOGO) EGS:CD:DJohnston:lr:10-2-78 ,'<' .'~ '~ If) t~T o,~ ~,,,\,,' /.f~ or:.'" "~I , ,.... ~ ':7~~'::¿' - '1;. Q ~~,........ -.>'" '-, . vi, ~ "; \ Õ :;I... .. 'j' ,,' ~~i!õ UNITED STATES DEPARTMENT OF THE INTER40R OFFICE OF THE SOLICITOR WASHINGTON. D.C. 20240 OCT 3 1978 Honorable Janes w. ~ Assistant Attorney General Lan:] aM Natural Resources Division Department of Justice Washirgton, D.C. 20530 Dear r·1r. McX)man: Re: £oPper Valley ~ach!ne ~rlæ, IrJC_. v. AOOtUS, Civil No. 78-1572 (D.e.D.C. filed August 18, 1978) (001 ref: 90-1-18-1337 TIl-icK:<::IJ3reen) '!his letter constitutes this Department's litigatioo report in the captioned case. Plaintiff, designated ~rator of lease Anchorage œ3937, challen:Je5 the refusal by the Secretary of the Interior to exterð the lease. STA'I'fJØ~ œ '!HE FAC'lS ~titive lease Anchorage 063937 was issued to Frlward M. Devine on February 1, 1966, am embraces section 23, 'f.4N. ,R.4W., Cbpper River Meridian. By assigment of Juœ 1, 1966, a 75-perœnt interest was assigned to Cecil ¡.oJ. Hinshaw. Near the eM of the lease tem, Cbpper Valley Machine Works filed a designation of operator, a bcn:1 with Cecil W. Hinshaw as principal, an ð¡:plicatiŒ\ for perot to drill (p.¡rsuant to 43 CFR S 221.21(b» aM a surfaœ use plan. In þJ:oœssilYj the aw1icatioo for ¡:emit to drill, œpresentatives of the Bureau of LaOO ~ement (ElM) ac<.a¡panied u.s. GeolcxJiœl Survey (U$S) personnel aM the c.perator in a pœ-driU site inspectioo. Q1 the basis of that inspection, B1J.1 outlined seven specific stipulatioos for surface protectioo. (Letter of Jan.Jaty 20, 1976, to Hr. ~ A. 9nith, USGS Oil and Gas SUpervisor ftan Mr. Jon M. Dolak, Bt.M Acting Area Manager.) ~ese st1¡:ulations were included in uæs awroval of Cbpper Valley's ççlicatioo for penait to drill anj 1nclWed a require- ment that drilling cnly be done during the winter seasœ, i.e., fran a¡:proximately NovEJTber 15 to aboot April 15, to protect thë "turora/perma- flOSt envir;onnent. ¿I cc: Conservation Division " . '-- .~ 'Ihe lease was extended by operation of law upon the conclusion by the Supervisor that drilling activites canmenced on Januaty 31, 1976, and continued across the lease term satisfied the "diligent drilling" requirerænts of 43 CFR 3107.2-3. On Januaty 20, 1978, the operator requested a 12 ronth extension to~nsate for the two periods of surrmer shutdCMn in 1976 and 1977 ~ ~is was treated as an application for suspension of operations pursuant to 43 CFR 3103.3-8. Upon recanmendation of US3S, the Secretary denied that application on May 22, 1978. The reasons for that denial were: (1) Copper Valley Machine rbrks was aware of the winter only drilling requirement at the time of lease extension by drilling and did not conplain until 11 days before the two-year extension was to expire and (2) Copper Valley Machine Works was accorded sufficient time, in the opinion of USGS, to have drilled and completed for production several wells on the lease. The denial of the application for suspension was camrunicated to Copper Valley Machine Works by letter dated July 17, 1978, fran Robert E. Goff, Acting Area Oil and Gas Supervisor. By letter of July 27, 1978, the Law Offices of Barokas & Martin, counsel for Copper Valley Machine Works, filed a notice of intention to appeal. On August 4, 1978, Barokas & Martin filed a Notice of AfPeal pur- suant to 43 CFR § 4.411 with U&;5. As of this date, no statement of reasons for appeal has been filed with the Interior Board of Land Appeals as required by 43 CFR 4.412. Copper Valley Machine Vbtks, Inc., IBLA 78-606. On August 18,1978, the firm Butler, Binion, Rice, Cook & Knapp filed suit in the District Court for the District of Colunbia on behalf of Copper Valley Machine Works. We have been informed informally by A. Karen Hill of Butler, Binion that they nON represent Copper Valley in the administrative appeal. DISCIJSSION In responding to plaintiff's allegations, as well as preparatory to filing notions or other papers with the Court, the follCMing topics are addressed for yoor consideration in this report. First, whether plaintiff has exhausted his administrative remedies. Second, the statutory nature of extensions to noncompetitive leases and the reasonableness of the stipulations :i.np::>sed upon lessee. Third, the nature of suspensions of operations. A. Exhaustion of Administrative Remedies Plaintiff's application for extension, which was treated as an appli- cation for suspension of operations, was forwarded to the Secretary by U&;S on March 30, 1978, for a decision. 'Ibis was done since there was no well capable of production existing on lease Anchorage -2- '-' ~ 063937. In those situations only the Secretary may direct a sus- pension in the interest of conservation. 43 CFR S 3103.3-8(a). (See, Part C infra). On May 22, 1978, the Secretary, on the basis of U&;S's recarmendation rejected plaintiff's application for suspension. Cases on finality of administrative action make it clear that ripeness for jUdicial review is to be determined on an assessrœnt of the nature and effect of the agency action and whether it inpœes sane obligation, denies some right or fixes same legal relationship as a consumation of the administrative process. Fidelity Television, Inc. v. F.C.C., 502 F.2d 443 (D.C. Cir. 1974): Environmental D=fense Fund, Inc. v. Ruckelshaus, 439 F.2d 584 (D.C. Cir. 1971). A second set of criteria is whether judicial review will embroil the courts in abstract debates over acìninistrative policy aoo whether the agency action is to a point where judicial review will not be disruptive. Independent Bankers Association v. anith, 534 F.2d 921 (D.C. Cir. 1976); Natural Resources D=fense Council, Inc. v. U.S. Nuclear Regulatory Ccmnission, 539 F.2d. 824 (2nd Cir. 1976). Urner 43 CFR § 4.410 the Interior Board of Land A¡::peals has no jurisdiction to hear an appeal where the decision has been approved by the Secretary. See, also 43 CFR § 4.5 (43 F .R. 37690 (Aug. 24, 1978) ) . While there is an appeal pending before the Interior Board of Land A¡;:peals, applying the standards in the above-cited cases to plaintiff's complained of action indicates that the Secretary's denial of plaintiff's application for suspension constitutes final agéncy action ripe for review. Y The Secretary's denial is the consurnation of the administrative process and as such fixes plain- tiff's rights to continued enjoyment of lease Anchorage 063937. B. Statutory Nature of Extensions While plaintiff originally filed for a twelve month extension of lease A-063937, U&;S and the Secretary treated its application as one for suspension of operations and productions. Plaintiff's lease, issued in 1966, is subject to the provisions of section 17(e) of the Minerals Leasing Act of 1920, as amended, 30 U.S.C. § 226(e) (1970). That section was amended in 1960 by section 2 of the Act of September 2, 1960, P.L. 86-705, 74 Stat. 781, and now provides: Oampetitive leases issued under this section shall be for a primary term of five years and noncanpeti ti ve leases for a primary term of .!I '!be Solicitor's Office will file a motion to dismiss the administrative proceedings on these grounds. -3- ~/ ten years. Each such lease shall oontinue so long after its primary term as oil or gas is produced in .paying quantities. lIDy lease issued urrler this section for larx1 on which, . . . actual drillil'XJ operations were cx:mnenced prior to the errl of its primary term aM are being diligently prosecuted at that time shall be exteooed for two years arrl 50 lCX19 thereafter as oil or gas is produced in paying quantities. -rhis is the sole source of authority for the Secretary to grant lease tetmS extensions to either canpetitive or ooncanpetitive oil arrl gas leases. 2/ It was p..trsuant to this authority, arx1 the regulations pranulgated thereuOOer, 43 CFR Subpart 3107, that the Area Oil arrl Gas Supervisor for USGS recxmnerrled and BIM a¡;proved the original extension of the lease effective January 31, 1976. HcMever, the statute is explicit in granting a single two-year extension. Hence, the Secretary had no authority to grant any further extensions to plaintiff in the absence of a well capable of production. '!he only case we have located which discusses section 17(e) of the Mineral Leasing Act is Enfield v. Kleppe, 566 F.2d 1139 (lOth Cir. 1977). '!he issue in that case was the validity arrl retroactive application of the regulation defining the Ii1rase "primary tenn. n 43 CFR § 3107. 2-l(b) (1976). After analyzing the statute, in a similar manner to that a1x>ve, the Circuit Court upheld the regulation arrl its application to previously issued leases. 1. Was Secretary En\pc7Ñered to Place Stipulations on Drilling Which Potentially Affected Plaintiffs Enjoyment of Lease? '!he question which arises at this juncture is whether the imposition of the winter only surface access stipulation was in excess of the Secretary's authority arrl thus oonstituted an impediment to the lessee or his designated operator in the enjoyment of the lease. The Secretary has the authority to include lease provisions "for the protection of the interests of the United States . . . arrl for the 2/ When a suspension of operations is ordered, the lease term is ex- terrled by whatever period of time the suspension is in force. H~ver, the lessee does rot have access to the lease for that period. (See discussion Part C infra.) Hence the statement that the Secretary canoot grant lease tenn extensions with full access other than as provided in section 17(e). -4- .~' safeguarding of the public welfare." MIA S 30,30 U.S.C. S 187. He is also authorized "to prescribe necessary and proper rules and regulations and to do any and all things necessary to carry out and acronplish the purposes of this Chapter. . ." MLA S 32, 30 U.S.C. S 189. In addi tion, he has "general managerial pcMers over the public lands." Boesche v. Udall, 373 u.s. 472 (1963). Construing similar authorizing language in the OUter Continental Shelf Lands Act, 43 U.S.C. S 1331 et ~., the Court of Appeals for the D.C. Circuit held that ther was "nothing inconsistent about an OCS lease having both a fixed duration and provisions permitting the reduction of that duration in the event of changed conditions. It State of Alaska v. Andrus, Civ. No. 76-1829, F.2d n.S8 (D.C. Cir. 1978). Nor was there anything to preclude lessees fran contracting to make leases cancellable for other reasons than those specifically enurœrated in the statue. Id. at_. Applying a similar line of reasoning to the ~sition of a winter only drilling stipulation, such a sti.pulation would appear supportable. See Natural Resources ~fense Counci.l v. Berklund, Ci v. No. 75-0313 (D.D.C. June 30, 1978). The lessee was on notice that its operations would have to be conducted in such a way so as to protect surface resources. Section 221.32 of 30 CPR requires that the "lessee shall not pollute streams or damage the surface or pollute the underground water of the leased or other land." (Ðrphasis added.) In order to acoornplish this protection, the lessee "shall oonply with the terms of the lease, and of the regulations in this part. . . and with the wri tten instructions of the supervisor" and "shall take all reasonable precautions to prevent. . . injury to life or property. . .It 30 CFR 221.18. The winter only drilling restriction constituted such a wri tten instruction. Nor is there any argLDænt that the inposi tion of a winter only drilling stipulation constituted a taking or condem- nation uooer Union Oil Co. v. Morton, 512 F.2d 743 (9th Cir. 1975) since plaintiff was afforded enjoyment of the lease sufficient, in the opinion of US:;S, 3/ to allow for the drilling of wells capable of production. y - ]V An affidavit and supporting documents showing the reasonableness US:;S's opinion will be prepared by this Office in conjunction with UffiS . . 4/ It will be noted fran the correspondence in the administrative file that plaintiff, during the 1976-1977 drilling season, was rotified by BLM on November 3, 1976, that drilling activities could be resuræd. (See Item No. 15, attachments, Administrative File). By letter dated January 26, 1977, plaintiff inforræd US:;S that he would resume drilling on February 5, 1977. (See Item No. 10, Admin i- strati ve File). By plaintiff's own inaction 1/2 of the winter drilling season was lost. -5- ~' '- Finally, the Secretary, pursuant to his rulemaking authority, may properly require existing lessees to oonply with rules subsequently pranulgated by him, Union Oil Co. v. ftbrton, 512 F.2d 743, 749 (9th Cir. 1975), or with orders issued by his subordinates which are con- sistent with those rules. Forbes v. United States, 125 F.2d 404, 410 (9th Cir. 1942). '!his is because the Congress, through the Secretary, exercises both a proprietary and a police pc1Ñer with respect to the publicly owned resources. Union Oil, supra, 512 F. 2d at 747: Forbes, supra, 125 F.2d at 408. C. Nature of Suspension of Operations. Section 39 of the Mineral Leasing Act, 30 U.S.C. § 209, provides, inter alia: In the event the Secretary of the Interior, in the interest of conservation, shall direct or assent to the suspension of operations and production under any lease granted under the terms of this chapter, any payment of acreage rental or of minimum royalty prescribed by such lease likewise shall be sus- pended during s~ch period of suspension of operations and production; and the term of such lease shall be extended by aooing any sud1 suspension period thereto. Pursuant to this authority, the Secretary has provided by regulation the method in which suspensions are to be granted and their effect. See 43.CFR 3103.3-8. In the case of oil and gas leases, where there is no 'well capable of production, suspension will only be granted where the Secretary directs it in the interest of conservation. 43 CFR 3l03.3-8(a). With respect to applications for suspension in other situations, the Secretary has delegated the authority to act on such applications to the Director (Secretarial Order No. 2699 of August 11, 1952, as arænded) who in turn has delegated this authority to the Area Oil and Gas Supervisors and the Area Mining Supervisors. (Geological Survey Order No. 218, of August 11, 1952, as ëUænded). lÀ1ring the period when a lease is uroer an order of suspension, the lessee has no rental or royalty obligations. lÀ1ring this period no acti vi ty may take place on the lease, either. Once the suspension is terminated (by either passage of time or the occurrence of a precondition to resuræd operations) the remaining term of the lease begins to run. MIA § 39, 30 U.S.C. § 209; 43 CFR 3103.3-8(b). A¡:plying this to the instant case, had the Secretary approved Copper Valley's application for suspension such approval would be as of the date of the application, i.e., January 20, 1978. Following the period of suspension, Copper Valley woold have had the remaining lease term (i.e., until January 31, 1978, or eleven days) in which to drill a well capable of production in an attenpt to extend the lease term by production under § 1 7 (e) of the Mineral Leasing Act, 30 U.S.C. § 226(e). -6- '~ . '!here is very little case law on the question of the Secretary's proper exercise of his suspension po.vers. '!he administrative cases are to be fOUI"rl in the nost recent decision of the Department on suspension. Jones- 0' Brien, 81 I.D. 89 (1978). The only case of which we are aware which challenges the denial of an application for suspension is Louis Mattis v. Andrus, Civ. No. 78-2888 RMr (PX) (C.D. Cal. filed July 25, 1978). '!here are two cases which deal with the inposition of a suspension of operations by the Secretary of his am notion. '!hey are Union Oil Co. of California v. Morton, 512 F.2d 743 (9th Cir. 1975) and Gulf Oil Corp. v. Morton, 493 F.2d 141 (9th Cir. 1973). 5/ Both these arose out of the Santa Barbara charmel oil spill in January 1969. '!he Ninth Circui t upheld the pa.¡er of the Secretary to impose these suspensions and held them valid so long as it could be shown that they were not so indefinite as to constitute a taking. Union Oil, supra, 512 F.2d at 751-752; Gulf Oil, supra 493 F.2d at 148. Gulf Oil also suggests the proper standard of review for the Secretary's action. It can be found invalid if it was unauthorized, 5 U.S.C. S 706(2){C), or if it was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law uooer 5 U.S.C. S 706(2){A). Gulf Oil, supra, 493 F.2d at 144. The Secretary is not directed to grant suspensions of operations uooer section 39 of the Mineral leasing Act, but rather i.s authorized to do so. The section makes clear it is a jud:¥nent of the Secretary. Sudl discretionary actions are reviewable under the arbitrary, capricious standard. Strickelman v. United States, 563 F.2d 413, 417 (9th Cir. 1977) (Entryman under Desert Land Entry 43', U.S.C. S 321 et ~.) ¡Littell v. Morton, 445 F.2d 1207 (4th Cir. 1971) (Denial of compensation to attorney on behalf of Indian tribe is discretionary). '!be affidavit and supporting documents, referred to in n.3, supra, will tend to show that plaintiff had been afforded sufficient 0p- portunity to drill several wells capable of production, and thus extend the lease term, and that, therefore, the Secretary's denial of an application for suspension was neither arbitrary nor capricious. PROPOSED ANSWER TO '!HE mMPLAIN!' COPPER VALLEY MAŒINE WORKS v. ANDRUS 1. Paragraph states conclusions of law which require no answer. 2. Paragraph states conclusions of law which require no answer. 5/ The J.XMer to direct suspension in section 5 of the OCS Act, 43 U.S.C. S 1334{a) (I) is very similar to that contained in the Mineral Leasing Act. -7- "~ \~ 3. Defeooants lack sufficient information arrl belief on which to admit or deny first sentence of paragra¡:tl. Defeooants admit that plaintff is designated cperator of lease Anchorage 063937, arrl that laOOs covered thereby are located in the State of Alaska. HCMever, lease Arx:horage 063937 was originally issued to Edward M. Devine who assigned a 75% interest to Cecil W. Hinshaw effective June 1, 1966. 4. þ AdIrii W 5. Mnit. It is ooted that Mineral Leasing Act § 17(e), 30 u.s.c. § 226(e) is incorrectly cited in oamp1aint as 30 U.S.C. l226(e). 6. Mnit first sentence of paragraph. Mnit first clause of secooo sentence. Defeooants lack sufficient information arrl belief 00 which to ërlmit or deny whether in fact plaintiff was "stymied" in the oooouct of operations. Further, reference to "suspension of operations" is incorrect, the proper designation is cessation of operations. (Suspension of operations suspeoos the running of the lease term. See 43 CFR § 3103.3-8(B). Deny third sentence: plaintiff oontinued to hold rights as designated operator subject to lease regulation for two-yearperioo. 7. Mnit. 8. Mni t. Canment: Paragraph seems superfluous since plaintiff has filed its ccmplaint in a timely fashion. 9. .AdIµit that plaintiff has 00 administrative a~al fran Secretary's denial 'of its application for suspension of operations. Deny that plaintiff is an aggrieved party. 10. !)afeooants adopt their answers to the allegations in paragra¡:tls 1-9 as res¡;x::>nsive to the allegations in paragraph 10. 11. !)any. 12. Deny. 13. !)any. 14. Deny. '!he requested relief should be OH?Qsed. It will be ooted that plaintiffs request for an extension of "12 calerrlar months" is inconsistent with its contention in paragraph 6 that the surface protection stipulations reooer the effective access to be only one-half that time. If the winter only access requirement is imposed, for plaintiff to recoup its wlost" 12 months, it ~uld be necessary to grant a two year extension.. We do not, of CXXlrse, suggest that. -8- " " . ,,~ '~ Accanpanying this report are two copies, one certified of the following material: (1) the Administrative file filed by US:;S with the Interior Board of Land Appeals, including the Secretarial denial of plaintiffs' application for extension [suspension] ¡ (2) Secretarial Order No. 2699, as arœnded, and (3) Geological Sw:vey Order No. 218, AIœndment 1. Also enclosed for your convenience are copies of the decision in Jones- O'Brien, Inc., 85 I.D. 89 (1978), Solicitor's Opinion, 78 I.D. 256 (1971) and a copy of the Notice to Lessees-6 (NrIr-6) (41 F.R. 18116 (May 5, 1976». We have assigned Kenneth Lee (343-4803) of this office primary responsibility for this litigation. Please feel free to contact h~ as the need arises. Sincerely, Robert Uram Acting Associate Solicitor Division of Energy and Resources Enclosures bec: IX>cket DER RF DER Onshore Minerals RF K. Lee (2) KGLee:sal:lO/2/78:x4803 Rewritten:RUram(KGLee:sal:10/3/78:x4803 UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY 800 "A" Street, Suite 109 Anchorage, Alaska 99510 .~ October 17, 1978 ,;. MEMORANDUM TO: Chief, Conservation Division THROUGH: Assistant C:onservation Manager I Alaska Area \<ì t 0//1 (1í' ~\1 Î FROM: Oil and Gas Supervisor, Alaska Area SUBJECT: Cop~~~l¡~.~achine Works, Inc., V. AMdrus, Civ. No. 78-1572 ~ Reference is made t.:o your request for information dated October 3, 1978, and to the memorandum from the Assistant Solicitor, Onshore Minerals Division of Energy and Resources, dated Septernber 26, 1978, requesting documentation on the subject case. Following is the documentation requested. 1. "Copper Valley was aware of the winter drilling only require- ment from the commencement of its extension by drilling, and made no compliant until 11 days prior to lease termination." We agree with Mr. Uran that the winter drilling only requirement is adequately documen·ted in the case file by the letter of approval for the Alicia No" .1 \\7e11 dated J>anuary 30, 1976.. Although the first written request for extension was received on January 20, 1978, 11 day~ before lease termination, Mr. White had made other earlier verbal inquiries concerning lease extension on December 21, 1977 and January 13, 1978 (see attached chronological history)" 2. "Copper Valley was accorded sufficient time, in the Survey's opinion, in which to have drilled and completed for production several wells on the lease.u Information on drilling times to comparative depths in other öil and gas tests wells in the area are included in Table 1. A general location map (Figure 1) and a more specific map (Figure 2) are included for you to locate the wells that a.re presented in Table 1. I am including two additional copies of this documentation package for your distribution to the Onshore Minerals Assistant Solicitor's office. If }'OU have any further questio.ns, please contact me. r· C";" li/ ,.-.'/" .....~-·LI "- Enclosure cc: Acting Conservation r''Îanagf~r 1 \vest.ern Region 12/31/75 1/12/76 1/19/76 1/20/76 1/22/76 1/30/76 1/30/76 1/31/?6 2/1/76 to 3/12/76 2/18/'76 4/23/76 5/21/76 11/1/76 11/2/76 Chro~ogical HIstory of Pertinent E~ts Copper Valley Machine Works, Inc. Alicia Well No.1, Lease A...ü6J93? First inquiry from J. White about requirements for drilling to ex.tend lease. Representatives of U.S.G.S. and BLM inSpêcted proposed site with J". Whi tee Recci.ved applicat.ionCor permit to drill Alicia No.. IJ NIl~ SWk Sec. 23, T. 4 N., R. 4 W.J Copper River Meridian to TD of 14·('0 ft. Received detailed drilling plan. Received letter from Acting Area Manager, BllA dated 1/20/76, concerning surface use and restricting use of access trails between April 15th and November 15th (copy enclosed). Received Designation of Operator from Cecil W. Henshaw, lessee, designating Copper Valley" Machine Works, Inc. as operator ior lease A-063937 and Bh~ decision accepting a $10>000 lease bond~ Oil and Gas Supervisor approved permit to drill with various conditioI1S of approval including approval of plan for winter season operations only and advising operator of BLM restric- tion of surface use~ Operator spudded well. Set 10" casing to 100 feet, worked on location, repaired equipment and cemented casing. Oil and Gas Supervisor requested deliquent reports an~ requested plans for diligent operations. Oil and Gas Supervisor notified operator that operations to date did not constitute diligent operations for lease extension and requesting plans. Heceived notice from ELM that significant surface damage would result from use of access trail ~nd they had so advised the operator. Recei.ved BI1.ß: letter to operator advising that he could resume activities. 0.11 and Gas Supervisor requf:sted firm plans for continuation Qf drilling" _.........4_.·'._ _.._._'_' >.__.- -___ _.'__"'''''-- . ..,..,.".-.-.....--.-.-.. .........-,_ < .....~.......'_'"'...H··'- 12/10/76 2/5/77 to 3/30/77 3/29/77 4/28/77 5/9/77 9/2/77 12/21/77 12/28/77 to 1/13/'78 1/20/78 Oil\'ãñd Gas Supervisor received teleþn6ne ca.ll from Mr. White advising that operations would sta.rt by 1/15/77. , Operator prepared location, set and cemented 5" casing at 300 feet, fuìd drilled to total depth of 1020 feet. Oil and Gas Supervisor received electric logs and samples and concurred that well satisfied "diligentU drilling requirements. Oil and Gas Supervisor advised BilÆ that drilling satisfied diligent drilling requirements under JO CFR 3107.2-3. Rece'~ 'fed written notic~ from operator that operations were temporarily suspended. Oil and Gas Supervisor requested delinquent reports and advised operator and lessee that the lease must be shown to be capable of production in paying quantities by January 31, 1978, or the lease will eÀ~ire on that date (copy enclosed). Received a telephone call from Mr. White advising that he intended to test well before 1/31/78. In response to question about extension, he was advised that the Oil and Gas Supervisor had no authority to grant another extension.. Further telephone conversations with J....r.r. White about plans and requirements for re-entry and testing and possibly obtaining extension. No action toward testing was undertaken. Received the subject request for 12 month extension of lease. - .~-_.. -......-----.~ ........--...-----. ..., ~..t {.... ~ í -..!~,/ ;'T~~' ... ~~~ ',' \ ~ ...., "N'\1:~Yl\: ¡i- t¡ylSlO1i . ~J ~ t' '-:; \ r ;j¡! c,) t) (1, " J I~,.," , I -~~ 1; \ 1 / "-' Uf'~¡TE:D ::-. O[P¡"J..RTi\¡1FNT OF 'TH ¡ r--,. "1! OF, [ H 2 6 i918 ME.::nDrandL1.'11 '1'0: J.\cting Chief, Conservation Di U..8 fi Geoloc:.-Jical Survey Fron¡: A&-;istant Solicitor, Onshore Division of Energy and Resources Subject: Copper V~).:.!s:y MachiI?:e Works Inc.. v. Andrus, Civ.. No. 78-1572 (D..C.D.C.. filed lmgust 18, 1978) The Secretary has been sued for failure to approve Copper Valley Nachine \dorks' application for suspension of operations on lease Anchorage 063937. That application was deniecl the Secretary on ~1ay 22, 1978, and cOfnmuni.cated to the Conservation f'lanager \'Jestern Reqion by merrorandum of JW"le 14, 1978, signed by 'I\vo reasons were q.i ven for tl:!e denial: ( 1 ) Cori-'€t' Valley was aWéll-e of the winter drill inS] only re..luirelrent from the COtlinencer;).?nt of its extension by dt:"illing ¿me] made no C'Dmplaint until 11 days prior to lease termina- tion a.nd (2) Copp~:r Valley was accorded sufficient time, in the Survey's oraniol'l, in which to ¡-lave drilled and prexiuction several 'wells on the lea.se. Tb:: first l.JÜint needs little docunentation other than what dr;pears the d.ctninistrati ve f ile, Wf; have in our IX)Ssession. The second point is stated as ð. matter of opinion. l'>.s such will be necessary to show the District Court the basis of LÌ1at opinion" T¡lould yo 1 plea::Je àevelop the neces~3ary docuræntat to sholl that COPI:-Jer Valley di.d indeed have sutficient drillin9 time. rrtÜs include: df:::pth of fOt1nations targetted, rate of drill. of various standard rigs, effect of cold weather on these rates, activites on leases in the vicini.ty, etc.. He can also develop an affidavit for YC)llr signature on these questLons.. Kenneth LeE::, the attorney resE:únsible for this contact I,.Ú th Charles P. Clifforà of Die Branch Gaf; ° l.x: r.a tions and has infor1nc"11ly is Jvailal.Ü..::: to \-¡or:k with Y(.)üc Etaff to fl.K defense of this 1itiSJati.on. case, tlas been in of Onshore and out::" n:.·::quest.. f"lr" Lee the necessdl-Y lnater ials l { 7 ll;~-'· ("~( t : ¿ (. v Yi--- Robert Ur";;"li11 \O\...ÙíîOi\t I' ',~ J/.-......'¡ Q-v c,<{\ . ' 1 :i,' ~; U L. ~f~< -,l~ ¡"tv . ,¡'ö 1/76"Î0;' Under the ternl¡:1 of the permit. granted to drill l\fCi. 1, it 1:':-1 rei..1uested that yeu prQce(1¡d "lith the of the ~n~¡ll ar!t1 the ~1urfaee t"estoration of appro'vaÜ, at. your 8Ð.rl1C':lEt co:rrV'eni~nce, a the On 22, , :"E)crc~tt;U"Y of the Interior; for a suspension of lease A-063937. to have expired Opf!ira.tj,on of' li;Ucl, as of '.rhE' r'($·ason~ for the der:dal are that 1) restriction that drilling could t'lÍ.nter' Se8$On 'I,·Jithout oornplaint unt.!l expiration date, and 2) the two ye~r lease across the f.md of' the primary terrv on ::mfficient t:¡,ddit.ionail time, despite tbe (;omplf¡~ted a "rell that 'íPJa.z:¡ p.hy~~ical1y quant,i t :i.rz:s. to ha.ve tile tor a 12 InO!1th , ha~ been denied Plea~èbe advised th.mt your ..January lease extension of Federal Oil and Gas Lease the Secretary of the Interior. t DeàX' ';, r' .:ill"dt.€: F,t tn: ? l~. .J ,::;"1(JS . ï" hi te Valley Machine Harks, Inc. Avenue, , Alaska 1"1 ",,,f , Street, ;)ui.t~ , Alt;3l.:::¡k[~, nIdi n. UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY IN REPLY REFER TO: f);~ t1~~(œi ll~,n :fOt1 t f~ fftf;;'€ c 1 t t t,t:.ìCt {:;(~r t1~-.¡i~ Z, t' ~,;; ¡ - E. Goff ttS.G.S..C~jS£IVA14ðti Ølvt$IOJ JtEC¡1VEÐ: enp-?'\.tH·¡ partinJ Attn. .R. Conservation Division ',.,.0;",,:1 ì ~Ft;l:ro~ça~, ~ef .,:;( ,118 OENê..KAL. ~~RV'CES UNIT ADMINISTRATIVE SECTION I JUL2 f'~I~'~ ,~UIf.JA~tMVt ~ P~óM;..ÚWJ..~ --¡'/1' )/:, ~/."/,..,i>·'-"'z',.,/t;',:./ . , I) , / 7 ¡¿~ ~' , . /,' /// k ~ 'i- ; -i,¡ , /, I/¡¡/ ,-9 './ Vi i./vt1/ V : 1))" ß (,1111' ~/¡,ftJ/1f In Reply Refer To: EGS~Mail Stop 620 JUt\; 1 4 1978 Memorandum To: Conservation Manager ~ Western Region From: Acting Chief, Conservation Division Subject: Denial of request of suspension of operating and producing requirements of Federal oil and gas lease Anchorage 063937, Alaska On March 30, 1978, the Acting Director transmitted to the Secretary of the Interior, for his consideration, a request filed by James W. White for a 12~onth lease extension of lease Anchorage 063937. This request was intended by Mr. White to be an application for suspension of the operating and producing requirements of the lease. On May 22, 1978, Secretary of the Interior Andrus denied the request for a suspension of lease Anchorage 063937. Accordingly, the lease is con~ sidered to have expired by operation of law as of midnight, January 31, 1978, absent the existence of a well on that date which had been deter~ mined by the Supervisor as capable of producing in paying quantities. The reasons for the denial are that <1) the lessee accepted the imposed restriction that drilling could be conducted only during the winter season without complaint until 11 days preceding the lease expiration date and (2) the 2~year lease extension earned by drilling across the end of the primary term on January 31, 1976, afforded sufficient additional time, despite the restriction, in which to have completed a well that was physically capable of production in paying quantities. Tha Alaska Oil and Gas Supervisor should notify James W. White of this decision by the Secretary with a copy of said notification being fur~ nished to this office and the appropriáte BLM State Office. Actingl!!!w{~~ Enclosure cc: ICD File (BOOGO) ~ska O&G Supv. ~ Anchorage OS&D Section Desk Files (ADC~O)(BOOGO) EGS:CD:CPClifford:dak:6~12~78 ./ 1~.. ... .ß..." ~>-~}- United States Department of the Interior Jf1f 1 GEOLOGICAL SURVEY RESTON, VIRGINIA 22092 In Reply Refer To: EGS-Mai1 Stop 600 Memorandum To: Through: From: Subject: MAR 3 0 1978 Secretary of the Interior ^^~ Assistant Secretary--Energy and Minerals07íSgd} JM!) MAY 15 1978 Solicitor I::: Acting Director, Geological Survey Request for suspension of operating and producing requirements of Federal lease Anchorage 063937, Alaska Copper Valley Machine Works, Inc., designated operator of lease Anchorage 063937, has requested a 12-month suspension of operations and production for the lease pursuant to 43 CFR 3103.3-8. A copy of this request is enclosed for your convenient reference. Noncompetitive lease Anchorage 063937 was issued to Edward M. Devine on February 1, 1966, and embraces all of sec. 23, T. 4 N., R. 4 W., Copper River Meridian. A 75-percent interest in the lease was assigned to Cecil W. Hinshaw effective June 1, 1966. As the lease approached the end of its 10-year primary term, Mr. James W. White of Copper Valley Machine Works, Inc., made inquiries of the Supervisor relative to extend- ing the 10-year lease term by drilling across the expiration date. Sub- sequent1y, Mr. White filed the necessary papers for the Supervisor's consideration, i.e., a bond with Cecil W. Hinshaw as principal, a designa- tion of operator, an application for permit to drill, and a surface use plan. In the interim period following the original inquiry and the 2 filing of such papers, a pre-drill site inspection was conducted by the Geological Survey, Bureau of Land Management (BLM), and the operator on January 12, 1976. In its fo110wup report, BLM outlined seven specific stipulations for the protection of the surface and recommended that the Supervisor incorporate such stipulations as a condition of his approval of the application for a permit to drill. The Supervisor followed BLM's recommendations in his approval action of January 30, 1976. Included among the stipulated conditions of approval was the requirement that the drilling operations could be conducted only during the winter season, i.e., from approximately November 15 to about April 15. This was necessary because the lease itself was issued without any stipulations for protection of the tundra/perma-frost environment. It is this denial of the right to conduct operations during the subsequent summer seasons (approximately April 15 to November 15, 1976, and April 15 to November 15, 1917) which resulted in the request for a l2-month suspension. The well was commenced on January 31, 1976 (the expiration date of the primary term), and reached a depth of 100 feet before having to shut- down for the 1976 summer season. Following the summer shutdown from May to November 1976, operations were recommenced on February 5,1977, and after reaching a depth of 1,070 feet on March 20, 1977, electric logs were run in the well. After evaluating the electric logs and examining the samples, the Supervisor concluded that the operator had satisfied the "diligent drilling " requirements of 43 CFR 3107.2-3, and recommended to BLM that the lease be extended to January 31, 1978. 3 After the 1977 summer shutdown, the Supervisor advised the operator and the lessee that the lease would expire January 31, 1978, absent a well physically and mechanically capable of production in paying quantities by that date. On January 20, 1978, the operator wrote the Supervisor and requested that the lease be extended for 12 months to compensate for the 2 periods of summer shutdown in 1976 and 1977. The Supervisor has considered this letter to be an application to the Secretary for an extension of lease Anchorage 063937 pursuant to 43 CFR 3103.3-8. We believe that the request for a suspension should be denied. Admittedly, the operator was unable to conduct operations on a full- time basis since January of 1976 by the imposition of the require- ment that operations would be permitted only during the winter months. However, no objection was made in that regard until 11 days prior to the expiration of the lease. Secondly, and of greater importance, is the fact that the operator was, in our opinion, accorded suffi- cient time in which to have drilled and completed for production several wells on the lease. If you concur with the foregoing, it is recommended that by your approval hereof you authorize the Area Oil and Gas Supervisor, Anchorage, 4 Alaska, to deny the requested l2-month suspension for lease Anchorage 063937 . t.S: aQ...u~' Ac.ting Direc.tor Enclosures Approved: MAY 2 2 1918 !lt~r; '~l~e~ II ~ 'S t"JC t...:opX,Jer "il'alley j'{{achj.ne %'oX'~tJS In~ " ('~~.!àcil N ~ 1Jaru:Jha1t·¡ _...._")Chief, Conservation Division (wi copy of DeYQung~ s . letter) .A.re P.l (Orig. Sgd.) Rodney A. Smith YOl1~$ p ~~~ a.re unahle. to t~erld ycn, copi~;'! ~Vf~:t' ;-:;opper V~'111ey ic1a~hine WorkB J' yç)ur oftEice will bl!! not.if:ieè1 gion¡~ or /let.ermina.tionæ¡; on t.he h()~;l- Wa~ f~rwarðed to the of tjf,)'E< r~qtlegt. fdr;\'~. t~V:.T~l V"'Ð JfíO.ilth lea.s~:~ ~}iêf Con$ervation oivi$ion for 41 CTJ"¡-;t :n 1) :;L 3 "~'~L Plew1®: ;~ìe advised 1::.hat t.his offio~ March 7 1978 concérning th~ on an oil and G~s leasåy lat'tf!l:r "'.)f" ':;'~11 t l@:r~n :n:t t~n !lír" Tl. R # 10 16 T;J(:¡;~t. 6t~"1 ;\'\r'3't'ft\9 t S'í.l.i:t~ 300 A.la 13kii!. 99501 Barok,~!Eí f¡' Ma:ctin. j!itarej'l 2~ j 11':)73 UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY 800 Bt Suit~ 10~ RJ.ask;;~< 99'501 IN REPLY REFER TO: ANCHORAGE ÓF"FICE AR6A CODE 907 TELEPHONE 272-2243 LAW OFFICES '-' R. R. DE YOUNG BAROIíAS & MA.RTIN ~. SEATTLE OFF'"ICE AREA CODE 206 TELEPHONE 662-7666 R.R.DE YOUNG 1016 WEST 6TH AVENUE SUITE 300 LARRY L.6AROKAS CHARLES R. BRANSON WADE R. DANN CRAIG R. DODEL LARRY G. .JOHNSON DALE R. MARTIN ANCHORAGE, ALASKA 99501 March 7, 1978 HECEIVED CffiCe: Of T..e OIL & Gþ,$ St." ¿i~ VISOR Rodney A. Smith Oil and Gas Supervisor Alaska Area United States Department of the Interior Geological Survey 800 "A" Street, Suite 109 Anchorage, Alaska 99501 HAJ,J () ¡ n:'\: \ () 1978 L-,.,~':;~VATIC>i C:V:S!ON u.s. CEOLC':~"_I,L SURVEY ANCHORP,Ç?E, AIA.sKA Re: Copper Valley Machine Works Oil and Gas Lease A-063931 Dear Mr. Smith: Your letter of February 28, 1978, addressed to James White, in care of this office, is hereby acknowledged. Thank you for your courtesy in responding to Mr. White. We are general counsel for Copper Valley Machine Works, Inc. and would like very much to know the content of the recommendations from your office which were made to the Chief, Conservation Division. Wuuld you advise us of the contents of those recommendations, and forward us a copy of them if possible? Thank you for your anticipated continuing cooperation. Very truly yours, BAROKAS & MARTIN ,4~ / ;f ,¿¿/¿c£y/ R.R. DE YOUNG RDY/jel cc: James R. White IN REPLY REFER TO: UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY 800 "An Street, Suite 109 Anchorage, Alaska 99501 February 28, 1978 J,lIr . James White Copper Valley :Machine Works 1016 West 6th Avenue, Room 300 Anchorage, Alaska 99501 Dear l\i1r. \JV.hi te : This letter acknowledges receipt ot your letter, dated January 20, 19?8, wherein you requested an extension of' oil and gas lease A-063931, to allow twelve additional months for activities to compensate for twelve months suspended by the U..S. Government. Since oil and ga.s production in paying quantities was not established on the lease prior to January 31, 1978, the lease expired by operation of law on that date. This office is considering your January 20, 1978 letter to be an application to the Secretary of the Interior for an extention of the above lease term pursuant to the provisions of 43 CFR 3103.3-8, Suspension of Operation and Production. Please be advised that your letter, with recommendations from this offica have been forwarded to the Chief, Conserva.tion Division in Reston, Virginia, for further processing. If you have any further questions concerning your request, please do not hesitate to contaot this office. Sincerely yours, (Orlg. Sgd.) RODNEY A. S1HTH Rodney A. 8mi th Oil and Gas Supervisor Alaska Area ~cting Chief, Conservation Division (2) '~ ~ UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOG ICAL SU RVEY 800 "A" Street, Suite 109 Anchorage, Alaska 99501 February 28, 1978 lVŒMORANDUM TO: Acting Chief, Conservation Division , v THROUGH: Conservation Manager, Western Region J~\~~~ THROUGH: Assistant Conservation Manager, Alaska Area y~ -r FROM: Oil and Gas Supervisor, Alaska Area SUBJECT: Application of Mr. James W. White, for Relief from Operations and Production Requirements to Allow a 12 Month Extension of Federal Oil and Gas Lease A-06393l. The attached letter from Mr. James W. White was received by the Oil and Gas Supervisor on January 20, 1978. This letter is considered to be an applica- tion to the Secretary of Interior to seek an extension of the terms of the subject lease pursuant to 43 CFR 3103.3-8. Mr. White is requesting an exten- sion of 12 months on the basis that he was not permitted to operate on the lease during the periods of April 1~ to October 15, in 1976 and 1977. The subject lease was issued February 1, 196~ for a primary term of ten years. The lessee was granted a two year extension until January 31, '1978, in accord- ance with 43 CFR 3107.2-3 since it was determined that diligent drilling operations were conducted over the expiration date of the lease. The lessee did not establish oil and gas production in paying quantities during the extended period of the lease and the lease expired by operation of law on January 31, 1978. One well has been drilled on the subject lease, the Copper Valley Machine Works, Inc. No.1 Alicia, SW! Section 23, T. 4 N., R. 4 W., Copper River Meridian. Drilling operations were conducted from January, 1976 to April, 1976 and from February, 1977 to April, 1977 when the well was suspended at a total depth of 1070 feet in the Cretaceous formation. Drilling operations were conducted by Copper Valley Machine Works, Inc. as lease operator under a Designation of Operator executed by Cecil W. Hinshaw, lessee, on January 28, 1976. A summary of pertinent events is enclosed for your easy reference. ~.. "- NIr. White's statement that he was directed to suspend activities during the periods of April 15, to October 15, in 1976 and 1977 are essentially correct. This surface protection stipulation was provided by the Acting Area Manager, Glennallen Resource Area, Bureau of Land Management by letter dated January 20, 1976, and was incorporated in the conditions of approval of the drilling permit issued by this office in a letter dated January .30, 1976, (copies of these letters are enclosed). Further reference to this requirement is included in a letter to James White from the Acting Area Manager, BLM dated November .3, 1976" (copy enclosed). Even though the operator was prevented from operations over the periods of April 15, to October 15, 1976 and 1977, there does not appear to be justifica- tion for relief as requested. The operator was notified of these operating requirements on January .30, 1976, and had sufficient time to complete one or more wells on the lease. The operator was also aware that the lease would expire on January .31, 1978, unless the lease was shown to be capable of production of oil and gas production in paying quantities prior to that date, and was so advised by letter dated September 2, 1977, (copy enclosed). In view of the above, it is recommended that the Secretary of the Interior deny the petition of Mr. James W. White for a 12 month extension of the subject lease. ~.r..""\ ....:.'. .....ér.··· {~~. 1Ø. , , ~L. '::::::::::::::''''Mß{"./ t "':', . :,~.v C-/ff f Rodney . Smith Enclosures .---- ~' COPPER VALLEY ~1ACHINE WORKS 1016 West 6th Ave. #300 Anchorage, Alaska 99501 RECEl VED OFfiCE Cf j .~ C.:.. & G \S $..... ~.,.¡ISOR January 20, 1978 JAr,' 20/,Q78 I f _J J;" I J "\ HAND DELIVERED ,. -. .__.~ ,c\TJC".: C!"/ISION l...S, GEOlC. -',L 0uRvEY ~ ¡. >~CHORAGE. ALASKA' u.s. Geological Survey 800 "An Street Anchorage, Alaska Attn: Oil and Gas Supervisor Mr. R. Smith :':Re: . Confirming Phone Conversation of December 9, 1977 Concerning Lease Extension Dear Mr. Smith: Copper Valley Machine was given a two (2) year extension because it was conducting continuous drilling operations at the end of the original .lease period. However, it was directed by the U.S. Government to suspend its activities on this lease during the periods, April 15 to October 15, in the years 1976 and 1977. These suspensions totaled 12 months. Therefore, Copper Valley Machine Works, Inc. ask that its lease be extended in a manner to allow 12 additional months for activities to compensate for the 12 months suspended by the u.S. Government. Sincerely, ~ ;Zop ER V~L.~~YMACHINEi t.":¡O~...~.S'..._.IN.C. - . _ ___ -:--.--1___ . I /. J, ---- ~ ~.~~ JAMES W. WHITE JWW¡jel ~~ 6 "'" 12/31/75 1/12/76 1/19/76 1/20/76 1/22/76 1/30/76 1/30/76 1/31/76 2/1/76 to 3/12/76 2/18/76 4/23/76 5/21/76 11/1/76 11/2/76 '~ Chronological History of Pertinent Events . Copper Valley Machine Works, Inc. Alicia Well No.1, Lease A-063937 First inquiry from J. White about requirements for drilling to extend lease. Representatives of U.B.G.S. and BLMinspected proposed site with J. White. Received application for permit to drill Alicia No.1, NWk SWk Sec. 23, T. 4 N., R. 4 W., Copper River Meridian to TD of 1400 ft. Received detailed drilling plan. Received letter from Acting Area Manager, BLM dated 1/20/76, concerning surface use and restricting use of access trails between April 15th and November 15th (copy enclosed). Received Designation of Operator from Cecil W. Henshaw, lessee, designating Copper Valley Machine Works, Inc. as operator for lease A-063937 and BLM decision accepting a $10,000 lease bond. Oil and Gas Supervisor approved permit to drill with various conditions of approval including approval of plan for winter season operations only and advising operator of BLM restric- tion of surface use. Operator spudded well. Set 10" casing to 100 feet, worked on location, repaired equipment and cemented casing. Oil and Gas Supervisor requested deliquent reports and requested plans for diligent operations. Oil and Gas Supervisor notified operator that operations to date did not constitute diligent operations for lease extension and requesting plans. Received notice from BLM that significant surface damage would result from use of access trail and they had so advised the operator. Received BLM letter to operator advising that he could resume activities. Oil and Gas Supervisor requested firm plans for continuation of drilling. Iii" 12/10/76 2/5/77 to 3/30/77 3/29/77 4/28/77 5/9/77 9/2/77 12/21/77 12/28/77 to 1/13/78 1/20/78 .-- Oil and Gas Supervisor received telephone call from Mr. White advising that operations would start by 1/15/77. Operator prepared location, set and cement§d 5" casing at 300 feet, and drilled to total depth of 10AO feet. 7 Oil and Gas Supervisor received electric logs and samples and concurred that well satisfied "diligent" drilling requirements. Oil and Gas Supervisor advised BLM that drilling satisfied diligent drilling requirements under 30 CFR 3107.2-3. Received written notice from operator that operations were temporarily suspended. Oil and Gas Supervisor requested delinquent reports and advised operator and lessee that the lease must be shown to be capable of production in paying quantities by January 31, 1978, or the lease will expire on that date (copy enclosed). Received a telephone call from Mr. White advising that he intended to test well before 1/31/78. In response to question about extension, he was advised that the Oil and Gas Supervisor had no authority to grant another extension. Further telephone conversations with·Mr. White about plans and requirements for re-entry and testing and possibly obtaining extension. No action toward testing was undertaken. Received the subject request for 12 month extension of lease. ..: ' I ; . :1 HI ,¡0bU-2 . Uanua'ry '1969} r(fonnerly 2~OO-3) UNI1 STATES . DEP ARTMEN'7*5F THE INTERIOR BUREAU OF LAND MANAGEMENT Township 4 N MAP , Range 4 W Serial Number n 0 ~"7J 9~? 7 5 ka..tc.n , Co,,"')o,- R. . , Meridian . j I I 1 I I I k..... . _fropos¢d .drilling s....¢ 1 " "U~ Sh~pa...d Spr1)"\9 ~ ¡/ 1 VAßM .2/7Z I Sha.pa.rd I I .. ðMPr141.5 I I I To T a..z.lina. R¡ VCl.1': I~ '1 I 1 · ^ . 23 . ~ · . · . ... / ~. G 1Q.~h_ H'.shWa.¡ . , M P ¡-¡IS · . . . 2CP . LAND OWNERSHIP KEY AND ADDITIONAL TOPOGRAPHIC SYMBOLS Scale: 1" =20 chains OTHER DATA ---- ..... -...- .---. t= -~i ~t·'r"\~ \ r~ ,\ lG.a~n ~rn_~. i·c; ~Jt ~-r .s~rt\(}Y'\ 2~ A nç ~-; 925 7 l Jon f)o I rLk t.f~"Y"\. J~) Ig7én LAND REPORT , . . MAP ~ u.s. Governrnent Printing Off1ce:1973-784-260/2254 1te¡1011 8 -. . ~ - 1 --r-- ~_. f1 ,-' flí:~~. 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"! 18 'v - ,- - - /'~. ,. .---- 'j -r ~ -- - . --._._~ I--------~-..-.¡ ~J~.~ 1.. ~ ~,¡ ~-r...~ J'- --~~~~-'_:"M-__~ %.,,1;-' it A~~"._-J Scale: I"::s 8 ,.",; T - "'-/ <#.H--!------- , I I ~ --:~-- -- t· ¡ I , . J , " '~ L:.. :, A¡¢ÏCl Well - J Lor.a+ioh MQP DQs~ecl iÞ\.C 01'\ ,"4 P ,.e p,..~,~~.~.t ...~t r: ~~':\'ft~ :,~ I ''!'fIt >41. "'-"" SOD "Aft Street &îchorage, ft. 99510 . September 2, 1977 Copper Valley Machine Works Ine. Box 284 Glenl1allen, Alaska 99588 Attention: Mr. Jim White RE: Alicia fl.1 A-0639J7 Gentlemen: We received your Sundry Notice for April, 1977, on th~ subject well in which it was stated: I1Develop..nent and operation is temporarily suspended. Well 1s ca.pped with bleed valve a.ttached." We ha.ve not received any further information or reports on this well. As long as the wall is temporarily' suSpended you are re- quired to submit monthly SlUldry Notices to this errect.A supply or Sundry t';otioe forms are enclosed for . your use. Approval must be obtained from this office prior to any resumption of drilling, testing, plugging .or construotion work. ) ;", This le&se:':Îli~~'.,11!'~'.é!JA~;i,.::~o.:)e.-:~a.pabl~".,.,.of' p;:~~~~~~~p.-;;.~~pti¥~ng;};t~ qu~~titieà b;y'.r~~")1~',.197g~'·'or the leaae.\dµ~-expl~ on.-thai~, 'de.t~,~; If you do' notplanimy additional drilllÍ1gor testing, you should furnish this office with a plugging program Q...Tld make p1ans to plug and abandon the ~ll. Sincerely yours, I(J1' c.....) ,. ~~.'''''''''''''''L1''''' y 1 "'".:;. '-';:;V-'j l' ~:!_'..."~l A. S!,ETB Rodney A. Smi th- Oil & Gas Supervisor Alaska Area Encl. ca. Cecil W. Hinshaw (lessee) Assistant ConservationlJanager Reading File Chrom -Alicia #1 A-063937 Area . .Alicia #1 A-063937 District RASmith:blh:9/02/77 r NOTEO " SEP 0 21977 ~ Ii. E. GOf~../ SlfEI80fJ""'" tJ3ION NOTEQ -- Do.Br:~ JLJ, . / ~()1eJ) , NOV 0 \: '191~ " Jl..,. OOf~ / cc: yrMr. Rodney A. Smith Oil and Gas Supervisor U.S. Geological Survey Box 259 Anchoraget Alaska 99510 Jon M. Dolak Acting Area ;!anager $inc~re1y , to the: site. unt11 spring when thawing conditions ~dl1 prohibit access inches. You mity not'1 re;sw;;¡e )fQur \tl~11 drilling activities Our field sxam1natiQn on NOv(~~bc:;r 1 t 1976. of your Alicia Hell ill site found the ground frozen in excess of six Dear ~~ra. \{hi te: l!r. t1a'~JeS H. h'hi te P. O. Box 2U4 Glefin~11£nt Alaska 99538 CERTIfIED NAIL RETURN HEt£IPT REQUESTEtJ t'!OVef'11:1er 3 tö7fE;':VAT~- .- "'i-:,'1t\l .>-, ". f u.š. GE()lO~-':_ ~- ~._,'v·:'y f\NCHCRÁ~;=, AL-,S<A N OV 0 ~-:\ 1976 Glennal1en Re$ourc~ Area P. O. Sûx 147 . Glennal1en, ¡r;~la$ka 99538 ^"'\,!I<- r"lft'>"'} "4 ft\;.>", I HI',,' ~-v l' -~}. \. ..}~-I' A-06,jS~37 RECLl VED OFFICE Of OIL & GÞ.S ::0.<;,. :;":,":;1< .~ ~ ~' gL1^ ·,~- .r "I; '\-~/ ~ - , UNITED STATES DEPARTMENT OF THE INTERIOR GEOLOGICAL SURVEY P.O. Box 259 Anchorage, Alaska 99510 Copper Valley Machine Works Inc. P.O. Box 284 Glennallen, Alaska 99588 Attention: Mr. James W. White ~mi1I" Attached is an approved permit to drill the Alicia Well #1, NWi SWi, Section 23, R. 4 N., R. 4 W., Copper River Meridian, on Fetleral Lease A-063937. ~fll!IJ!1iJI"ï!iii~!i!f~l'~ . ""and ~req{ílrëmè'rits'<~des'Òi-ibed below: ì 1. Compliance with applicable Federal and State regulations and rules including those on sewage and liquid discharge, spill containment, waste handling, water treatment, air quality, surface use, travel and transport, and material use. Your attention is specifically directed to the "Diligent operation" requirement of 43 CFR 3107.2-2, a copy of which is attached for your convenient reference. 2. Initiation of weekly report upon commencement of location construction. See Item 6 of Conditions of Approval. 3. Special precautions shall be taken in the handling df fuel, waste fluids, and liquid contaminants so as to prevent accidental spills, overflows, or seepage.. 4. Prior approval must be received for any significant change from the approved permit or plan. 5. Total depth of well shall be 1400 ft. or no less than 300 ft. below the surficial deposits into the Cretaceous, which- ever comes first. 6. Well location shall be located by a registered surveyor and a certified plat filed with this office. :r' go .. 7. No surface disturbance is permitted within 150 ft. of Shepard Springs or the VABM monument. 8. Access to the location from the Glenn Highway sh~ll be restricted to the ~xisting trails. 9. Any topsoil removed for site preparation or pit construction shall be stockpiled for replacement in site restoration. After operations are completed, application of seed and fertilizer may be required as prescribed by the appropriate surface managing agency. 10. ,~\.~rðV'é~~a!f~"'lf'E~t1bri~'fand de elo ment la~F;r ~::.\ ,~~t'';':~;P''t:''''':';'::>'T'!"*Af''~~':'':""'~¡'*:!':i:>'ê,"?,,\é?":~~r¡~'1š""'7::':;;~""'~' ""12,,,·, .'/> P,f~' ~~.gt.~19~~L~ªill:!-~~IJJ:~,,;:xt!Éì~tJ.§~~.~2E)!L,"-?P:~~! ':. as a pprov éd the appropriate surface managing agency. 11. Other specific surface drill site construction and rehabili- tation activities which are adopted as conditions of this permit are detailed in the attached letter dated January 20, 1975, from the Authorizing Officer, Bureau of Land Management. ~rIõ~~"~ppr·8·~;,~·:'.~w{î_~·f))~·'~Êe.ë~ìX.êd-~.>~.8f:>:~1I~~~I~~Ì~r~~Ht'~£í;~§r~:rf#S~~%¡~>o. " (..:tþe"âa:pp'~oyed .pe.rrr.l::Liï..orp~ar~."~ /' If you have any questlons on thls permit or the permit requirements, please contact this office at 800 "A" Street, Anchorage, Alaska 99510, Telephone 278-3571. In case of an emergency, the following U.S.G.S. personnel can be contacted during off duty hours: T 1 h N b e ep one um er W. C. Wurmicke 279-4996 344-4056 Dale Roberts Kenneth Boone 333-2754 333-4640 Rodney A. Smith If you have not already done so, please furnish this office the name, address, and telephone number(s) of supervisors responsible for the approved operations. Sincerely yours, \"~', c'\' c::--... ,'.. '\. I . ._ " ,. ,'j ,..,/ ( .1 .'. ¥ "_-"~-""").-î""..,; CL-<.'t;~ ..- \. '- ,." ........X é Rodney 'A. Smith Oil and Gas Supervisor Alaska .Area .... . _'.. .. - .__ . _... _. ._. ....... -4 _ .. .._ . _ _ _ __ . 5. Approval for use of the access trails during the period April 15 to November 15 shall be at the discretion of I j ! ,; . i ~ . . ' .I< , ~ i , I f ; t J . ~ 1. 2. f I t 1 -'i ¡ 3. . _11 -. . . - . _. - -..- ---.""..- --- . - i I \ t_~__~_. _._ r -.. ~ \ 'nc L.. 011. & r 4" ~"" IlVISOt '- .~ · '. llA~tl") 2 ~976 . United States Department ot the rnt~rlor . CONSfl(VATICN r1\'ISION BUREAU OF LAND MANA~""EN.:F:IC/.l SURVEy ANdiORAGE. AlASKA G1ennallen Resource Area P. O. Box 147 - Gl enna 11 en. Alaska ~9588 IN REft...., REFE" TO: 3045 (103) A-063937 . . . . January 20, 1976 Mr. Rodney A. Smith 011 and Gas Supervisor U.S. Geological Survey Box 259 Anchor~get Alaska 99510 Dear Mr. Smith: This letter is in reference to the proposed well drilling on Oil and Gas Lease A-063937 by Jim White. It is our request that the following items concerning surface protection of the drilling site and access trails be incorporated:;¡s ·stipulations in the drilling permit your office is conside'ring issuing to Mr. White. Access will be restricted to the existing trails as shown on the attached map. Where blading is necessary for the construction of the drilling pad or holding pits. the top one foot of soil will be stockpiled separately from the subsoil material. This soil will be spread back over the disturbed area during rehabilitation with the topsoil being spread on the surface. Rehabilitation of storage pits shall consist of pJacîng in the pit black spruce logs that were cut down for the drill site clearing. Next. the subsoil. will be spread over the logs. and finally the topsoil will be spread over the pit. This process should result in a mound of 3 to 4 feet over the pit area. 4. Rehabilitation of the drill pad shall consist of blading the subsoil and then spreading the topsoil over the disturbed areas. I ¡ I J I ! - - . 1 -. ---.:: . -.. - -' ~ ...-- .', . ---..-. . - ---~-- ----- ...--. -.... -..... -~-- ._-----_. --..--. -_. --.. - --... . i-.-..--___ __ ... ..:. " ------...-....... --~----.!!---< -_.~.__._.'--. ..' . .L.....-"_____. .. It -" .- . . -......- . - . . ...... e". ._.. ._. __.' ~ _ _ -. - .- '-". . -,.. --- "". _.,- --......;.-....-~.---..,;..._. ~ ......-. _....:.._-~~---.-......... ~. ---~...--.....--...........-.....~..............~ -~. .......---.-+:....:.. - . . . ...__ _ __..-...._.4~ ."':..:__.~......_. -~. . . .. . .....-. -.. ---.-.. ---. -- .-----. \. . ... .. Enc 1 os ure<",;:: '., ,-: As stated " " ~tI rfl. 7J~ Acting Area Manager Sincerely, the Authorized Officer, Bureau of land Management. Any trail damage caused by this operation shall be repaired by the permittee to the satisfaction of the Authorized Officer. BLM. ' 6. No drilling or associated surface disturbance will occur within 150 feet of Shepard Spring. 7. All trash shall be hauled away and deposited in an autho- rized dump. . ~..'~. \-.....:.. . - ;r ,"0 :\.... ........-.~---_. .... -..-... <Þ , \- .. .." , .f ,,. I .~ L < i I ~ ¡ ì' I I j , ! . ! ' I ! #