Devon Energy Production Co. v. Mosiac Potash Carlsbad, Inc.

693 F.3d 1195, 181 Oil & Gas Rep. 1019, 2012 U.S. App. LEXIS 17795, 2012 WL 3590862
CourtCourt of Appeals for the Tenth Circuit
DecidedAugust 22, 2012
Docket11-2026
StatusPublished
Cited by182 cases

This text of 693 F.3d 1195 (Devon Energy Production Co. v. Mosiac Potash Carlsbad, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Devon Energy Production Co. v. Mosiac Potash Carlsbad, Inc., 693 F.3d 1195, 181 Oil & Gas Rep. 1019, 2012 U.S. App. LEXIS 17795, 2012 WL 3590862 (10th Cir. 2012).

Opinion

HOLMES, Circuit Judge.

Plaintiff-Appellant Devon Energy Production Company, L.P. (“Devon”), an oil and gas production company, appeals from the judgment of the United States District Court for the District of New Mexico, which dismissed Devon’s declaratory-judgment action against Defendant-Appellee Mosaic Potash Carlsbad, Inc. (“Mosaic”), a potash mining company, 1 for lack of subject-matter jurisdiction. More specifically, under Federal Rule of Civil Procedure 57, Devon sought a declaratory judgment that federal law completely preempted Mosaic’s anticipated state-law claims emanating from Devon’s unauthorized drilling in a federally managed area of New Mexico known as the “Potash Area,” and that the only remedies available to Mosaic were derived from the federal administrative and judicial remedies of the Administrative Procedure Act (“APA”) and certain regulatory provisions of the U.S. Department of the Interior that govern oil, gas, and potash leasing and development within the Potash Area. Devon alleged that the district court had federal-question jurisdiction over its declaratory-judgment action under 28 U.S.C. § 1831.

The district court concluded that there was no federal-question jurisdiction to support Devon’s action and dismissed its complaint, and subsequently denied Devon’s motion to alter or amend the judgment under Federal Rule of Civil Procedure 59(e) (“Rule 59(e) motion”). We affirm.

I

We start by describing the Potash Area that is at the center of this dispute. Eddy and Lea Counties in New Mexico contain vast amounts of subsurface potash and also oil and gas reserves. The U.S. Department of the Interior’s Bureau of Land Management (“BLM”) manages the Potash Area, which encompasses approximately 497,000 acres in Eddy and Lea Counties. In an effort to allow for the prospecting, development, and production of potash and oil and gas resources within the Potash Area, the BLM issues leases that allow various companies to mine potash and to drill for oil and gas. 2 To *1199 accomplish this goal, the BLM has implemented rules as outlined in the BLM’s “1986 Secretarial Order,” which was issued under the Mineral Leasing Act of 1920 (“MLA”), 30 U.S.C. §§ 181-196. See Oil, Gas and Potash Leasing and Development Within the Designated Potash Area of Eddy and Lea Counties, New Mexico, 51 Fed.Reg. 39,425 (Oct. 28, 1986), corrected 52 Fed.Reg. 32,171 (Aug. 26, 1987) (the “1986 Order”).

The 1986 Order contains provisions addressing the issuance of both potash and oil and gas leases. See 1986 Order § 3(III)(A), (C). Most relevant to this appeal are certain conditions imposed, by stipulation, on the recipients of oil and gas leases. The 1986 Order states that “[d]rilling for oil and gas shall be permitted only in the event that the lessee establishes ... that such drilling will not interfere with the mining and recovery of potash deposits, or the interest of the United States will best be served by permitting such drilling.” Id. § 3(III)(A)(1). Further, under the 1986 Order, “[n]o wells shall be drilled for oil or gas at a location which ... would result in undue waste of potash deposits or constitute a hazard to or unduly interfere with mining operations being conducted for the extraction of potash deposits.” Id. § 3(III)(A)(2).

In March of 2005, Devon submitted an Application to Permit Drilling (“APD”) to the BLM to drill a new well in the Potash Area, which was labeled the “Apache Well.” Aplt.App. at 127 (Dist. Ct. Mem. Op. & Order, filed Oct. 19, 2010). The BLM denied the APD because of “mining impact,” 3 but it informed Devon that it would approve the well if it were moved to a location between two previously drilled wells. Id. at 5-6 (Compl., filed July 15, 2010); see id. at 127-28. Devon agreed to move the Apache Well to the new location. However, rather than drill at the approved location, Devon incorrectly placed the well at the original location that the BLM had never approved.

In February 2006, Devon discovered its mistake and reported it to the BLM. Thereafter, Devon requested approval of the Apache Well, as drilled, in the original location. The next month, after performing an environmental assessment, the BLM approved the Apache Well, as drilled. Upon learning of Devon’s mistake, Mosaic contacted Devon to assert that it had wasted mineable potash by drilling at the wrong location and caused Mosaic damages. The parties attempted to negotiate their dispute, but eventually those discussions reached an impasse.

In July 2010, Devon filed suit against Mosaic in the United States District Court for the District of New Mexico seeking declaratory relief under Federal Rule of Civil Procedure 57. In its complaint, Devon anticipated that Mosaic would file suit against it for money damages under state law, and therefore it sought a declaration that (1) “federal law has completely preempted all oil and gas and potash opera *1200 tions and activities with regard to the location and drilling of oil and gas wells and mining operations on the lands and leases involved in this controversy,” and (2) “the only remedies available to Mosaic are the federal administrative and judicial remedies under the Administrative Procedure Act and the Secretary of the Interior’s 1986 Order ..., none of which include any monetary claim for damages.” Aplt.App. at 1-2. Devon asserted that the court had federal-question jurisdiction under 28 U.S.C. § 1331.

Mosaic responded by filing a motion to dismiss for lack of subject-matter jurisdiction. Mosaic argued that the district court lacked jurisdiction over Devon’s claim because, as relevant here, the Complaint “fail[ed] to assert a federal question.” Aplt.App. at 27 (Def.’s Rule 12(b)(1) Mot. to Dismiss for Lack of Subject Matter Jurisdiction, filed Aug. 11, 2010). Mosaic maintained that any federal issue that may arise would be only by way of a defense asserted by Devon, and that a defense was insufficient to support federal-question jurisdiction.

The district court agreed with Mosaic and dismissed Devon’s complaint. It first concluded that the lack of any private cause of action in the MLA precluded a finding of complete preemption. It then rejected Devon’s argument that the district court had “federal question jurisdiction because Mosaic’s claims require[d] [it] to construe federal law.” Id. at 136 (quoting Dist. Ct. Doc. No. 11, at 20 (Pl.’s Mem. in Resp. to Def.’s 12(b)(1) Mot. to Dismiss for Lack of Subject-Matter Jurisdiction, filed Aug. 26, 2011)) (internal quotation marks omitted).

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Bluebook (online)
693 F.3d 1195, 181 Oil & Gas Rep. 1019, 2012 U.S. App. LEXIS 17795, 2012 WL 3590862, Counsel Stack Legal Research, https://law.counselstack.com/opinion/devon-energy-production-co-v-mosiac-potash-carlsbad-inc-ca10-2012.