Del-Rio Drilling Programs, Inc. v. United States

46 Fed. Cl. 683, 146 Oil & Gas Rep. 525, 2000 U.S. Claims LEXIS 89, 2000 WL 656186
CourtUnited States Court of Federal Claims
DecidedMay 16, 2000
DocketNo. 569-86L
StatusPublished

This text of 46 Fed. Cl. 683 (Del-Rio Drilling Programs, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Del-Rio Drilling Programs, Inc. v. United States, 46 Fed. Cl. 683, 146 Oil & Gas Rep. 525, 2000 U.S. Claims LEXIS 89, 2000 WL 656186 (uscfc 2000).

Opinion

OPINION

BRUGGINK, Judge.

This is an action for breach of contract or, in the alternative, for a Fifth Amendment [684]*684taking. The property which is the subject of the claim consists of interests in oil and gas leases. The leases are on the Uintah and Ouray Indian Reservation in central Utah. The matter is currently before the court after a trial, held March 20 and 21 in Salt Lake City, Utah, on the issue of whether the federal government denied the plaintiffs access to the leases at issue here.

Del-Rio Drilling Programs, Inc., (“Del-Rio”) and the other plaintiffs allege that the United States, acting through the Bureau of Indian Affairs (“BIA”) and Bureau of Land Management (“BLM”), violated the terms of leases by improperly permitting the Ute Indian Tribe (“Tribe”) to control physical access necessary to develop the leases.1 In the alternative, they allege that these actions constitute a taking of their leasehold interests without just compensation in violation of the Fifth Amendment of the United States Constitution.

As a predicate to the resolution of the issue of whether the government, acting with and through the Tribe, denied plaintiffs access, the court hereby reinstates its earlier holding in Del Rio Drilling Programs, Inc. v. United States, 35 Fed.Cl. 186 (1996) (“Del Rio I”). That opinion was previously withdrawn by Del-Rio Drilling Programs Inc. v. United States, 37 Fed.Cl. 157 (1997) (“Del Rio II”). Del-Rio II, in turn, was reversed by Del-Rio Drilling Programs, Inc. v. United States, 146 F.3d 1358 (Fed.Cir.1998) (“Del-Rio III”). The court views one of the necessary consequences of Del-Rio III as an instruction that it can adjudicate, as it did in Del-Rio I, the legality vel non of BIA’s and BLM’s interpretation of the Tribal Consent Act. Reinstating the opinion is necessary before proceeding further. If the agencies properly viewed the Tribe as having the right to prevent access, then the government was not wrongfully interfering with any property interest or contract right of plaintiffs.

There are two immediate effects of reinstating Del Rio I. First, it establishes that the plaintiffs’ takings claim did not accrue until, at the earliest, after September 8, 1983. See 35 Fed.Cl. at 192. Second, and most importantly for purposes of this opinion, it establishes that, contrary to the position of BIA and BLM, the Tribal Consent Act2 did not give the Tribe the legal right to stop plaintiffs from accessing their leasehold estates. See 35 Fed.Cl. at 193-98.

FACTS

Between 1968 and 1974, BLM issued several leases to plaintiffs, or their predecessors in interest, which gave plaintiffs subsurface oil and gas mining and development rights in contiguous lands located, in part, on the Uintah and Ouray Indian Reservation (“Reservation”).3 The leases are all of a standard form and give plaintiffs the “exclusive right and privilege to drill for, mine, extract, remove, and dispose of all the oil and gas deposits” located on the lands encompassed by the individual leasehold estates.

In September, 1981, the leases at issue here were compiled into the “Oil Canyon II Unit” (“Unit”). Inclusion of leases within a unit allows all of the leases to continue as long as the unit is in effect, i.e., provided that there is production of oil or gas in paying quantities from a “unit well” prior to the expiration of the leases.4 43 CFR § 3107.3-1 (1999).5 When the unit is terminated, the individual leases are automatically extended for two years. 43 CFR § 3107.4. Most of the leased lands are located on a southern portion of the Reservation known as the “Hill Creek Extension.” Del-Rio was the “operator” of the Unit and thus responsible for the [685]*685day-to-day drilling operations on all of the leases within the Unit.

Defendant maintains that only twelve leases are referred to in the complaint and thus those twelve are the only ones properly before the court. Plaintiffs maintain that their claims include additional leasehold estates, located on what the parties refer to as the “Tenneco Farmout.” The Tenneco Farmout was encompassed within lease U-46696, and only a portion of it was within the borders of the Unit. The court will not address this issue now, however. It is sufficient that the disputed leases are located within the area to which plaintiffs claim they were denied access.

In the spring and summer of 1982, Del-Rio received the requisite approvals from BIA and the United States Geological Survey (USGS), and began drilling well 26-1A on lease U-10165.6 Well 26-1A was to serve as the initial unit well for the Unit, and was located just within the borders of the Reservation. Due to a particularly bad winter in 1982-83, Del-Rio did not complete well 26-1A, and it was not put into production in 1982.

On March 25, 1983, Ed Guynn, BLM District Oil and Gas Supervisor, wrote Del-Rio concerning the agenda for an upcoming pres-taking conference for four proposed wells on the Tenneco Farmout.7 His letter, in addition to listing some matters routine to a prestaking conference, stated that: “Cultural, wildlife, T.E. species and access concerns have been raised by the [Ute] Tribe for these locations. A special zoning stipulation has been developed by the Tribe and will be presented at the meeting.” Onsite inspections of the proposed drill sites were scheduled for June 23,1983.

In mid-April, 1983, Del-Rio had a meeting with officials of the Tribe, attended by representatives of both BIA and BLM. At this meeting, Del-Rio learned that the Tribe wanted to interdict or, at the very least, severely limit, Del-Rio’s access to the Hill Creek Extension. Del-Rio was understandably concerned by this development. At the time of the meeting, Del-Rio already had producing wells located on the Hill Creek Extension, was planning on completing well 26-1A in the summer of 1983, when weather permitted, and was seeking to expand its operations into the Tenneco Farmout. Any denial of access to the Hill Creek Extension could only be seen by Del-Rio as a serious threat to its operations.

At the time Del-Rio learned of the Tribe’s plans to limit access to the Hill Creek Extension, Del-Rio was beginning to face some significant deadlines. Most of the leases within the Unit were due to expire on June 4, 1983. This meant that Del-Rio either had to establish production on the unit obligation well, 26-1A, thus continuing the terms of all leases within the unit, or find some other way to extend the terms of the leases.

The primary evidence about events in 1983 came from the testimony of plaintiffs Larry Caldwell and Steven Martens. The court found the testimony of these witnesses to be credible, particularly that of Mr. Caldwell. Mr. Caldwell is the founder of Del-Rio and participated in virtually all of the events that form the basis of this lawsuit. Additionally, he has spent his entire adult life in the oil and gas exploration and drilling industry. He communicated regularly with Mr.

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Related

United Nuclear Corporation v. The United States
912 F.2d 1432 (Federal Circuit, 1990)
Del Rio Drilling Programs, Inc. v. United States
35 Fed. Cl. 186 (Federal Claims, 1996)
Del-Rio Drilling Programs, Inc. v. United States
37 Fed. Cl. 157 (Federal Claims, 1997)
Del-Rio Drilling Programs Inc. v. United States
146 F.3d 1358 (Federal Circuit, 1998)

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Bluebook (online)
46 Fed. Cl. 683, 146 Oil & Gas Rep. 525, 2000 U.S. Claims LEXIS 89, 2000 WL 656186, Counsel Stack Legal Research, https://law.counselstack.com/opinion/del-rio-drilling-programs-inc-v-united-states-uscfc-2000.