Copper Valley MacHine Works, Inc. v. Cecil D. Andrus, Secretary of the Department of Interior

653 F.2d 595, 209 U.S. App. D.C. 340, 71 Oil & Gas Rep. 453, 1981 U.S. App. LEXIS 14003
CourtCourt of Appeals for the D.C. Circuit
DecidedApril 23, 1981
Docket79-1994
StatusPublished
Cited by12 cases

This text of 653 F.2d 595 (Copper Valley MacHine Works, Inc. v. Cecil D. Andrus, Secretary of the Department of Interior) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Copper Valley MacHine Works, Inc. v. Cecil D. Andrus, Secretary of the Department of Interior, 653 F.2d 595, 209 U.S. App. D.C. 340, 71 Oil & Gas Rep. 453, 1981 U.S. App. LEXIS 14003 (D.C. Cir. 1981).

Opinions

Opinion for the Court filed by Circuit Judge MacKINNON.

Concurring opinion filed by District Judge JOHN H. PRATT.

MacKINNON, Circuit Judge.

The principal issue in this appeal is whether a restriction in a drilling permit prohibiting 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.

I. BACKGROUND

Effective February 1, 1966, the Secretary of Interior issued 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.)

Near 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 10-year lease term by drilling across the expiration date.”2 Subsequently Copper Valley filed for the Supervisor’s 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 conditions and requirements described below:
10. The approved application and development plan provides for operation during the winter season only, as approved by the appropriate surface managing agency.

(App.Ex. F at 2) (emphasis added). This “winter season only” restriction was considered “necessary because the lease itself was issued without any stipulations for protection of the tundra/perma-frost environment during the months of summer thaw.” (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 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 3107.2-3,3 and recommended to BLM that the lease be extended to January 31, 1978.
[598]*598After 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 twelve (12) months to compensate for the two periods of summer shutdown in 1976 and 1977. The Supervisor 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.]

Although acknowledging that Copper Valley had been “unable to conduct operations on a full-time basis since 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 recommended that no extension of the lease be granted or recognized.

On May 22, 1978, the Secretary of Interi- or followed the Acting Director’s recommendation, ruling that

the lease is considered 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 determined by the Supervisor as capable of producing in paying quantities. The reasons for the denial [of extension] are that (1) the lessee accepted the imposed restriction that [599]*599drilling 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 of 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.

Memorandum from Acting Chief, Conservation Division to Conservation Manager, Western Region (June 14, 1978), reprinted in App.Ex. V at 1.

B. Decision of the District Court

On July 17, 1978, Copper Valley was advised of the Secretary’s May 22nd action, and on August 18 sought a declaratory judgment in the United States District Court for the District of Columbia that the Secretary’s refusal to permit another 12 months of operations was unlawful. Copper Valley relied on section 39 of the Mineral Leasing Act of 1920, as amended, which provides in part:

In the event the Secretary of Interior in the interest of conservation, shall direct . . . the suspension of operations and production under any lease granted under the terms of this Act, any payment of acreage rental or of minimum royalty prescribed by such lease likewise shall be suspended during such period of suspension or operations and productions; and the term of such lease shall be extended by adding any such suspension .. . thereto.

30 U.S.C. § 209 (emphasis added).5

On the parties’ cross-motions for summary judgment, the district court ruled in favor of the Secretary. Copper Valley Machine Works, Inc. v. Andrus, 474 F.Supp. 189 (D.D.C.1979). The court reasoned that drilling permit restrictions, which the lessee had agreed to accept in signing the lease, did not amount to a “suspension of operations and production” because Congress meant to apply that phrase only to

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. [1737, 72d Cong., 1st Sess. 3 (1932)] and 76 Cong. Rec. 705 (Dec. 19, 1932).

Id. at 192. The court also indicated that Copper Valley’s action was untimely inasmuch as the Secretary’s imposition of the “winter season only” restriction in the drilling permit of January 30, 1976 triggered the 90 day period for seeking judicial review of adverse agency action. Id. (citing 30 U.S.C. § 226-2). This appeal followed.

II. ANALYSIS

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653 F.2d 595, 209 U.S. App. D.C. 340, 71 Oil & Gas Rep. 453, 1981 U.S. App. LEXIS 14003, Counsel Stack Legal Research, https://law.counselstack.com/opinion/copper-valley-machine-works-inc-v-cecil-d-andrus-secretary-of-the-cadc-1981.