Phillips Petroleum Co. v. Lujan

951 F.2d 257, 1991 WL 251578
CourtCourt of Appeals for the Tenth Circuit
DecidedDecember 2, 1991
DocketNo. 90-5122
StatusPublished
Cited by15 cases

This text of 951 F.2d 257 (Phillips Petroleum Co. v. Lujan) 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
Phillips Petroleum Co. v. Lujan, 951 F.2d 257, 1991 WL 251578 (10th Cir. 1991).

Opinion

BALDOCK, Circuit Judge.

Defendants-appellants, the Secretary of the Interior and his department, the Mineral Management Service which is a division within the Department of the Interior, and two other administrative officials of the Mineral Management Service, appeal the district court’s order granting summary judgment to plaintiff-appellee, Phillips Petroleum Company, in a declaratory action. We have jurisdiction under 28 U.S.C. § 1291. Our review of orders granting motions for summary judgment is de novo. United States v. Gammache, 713 F.2d 588, 594 (10th Cir.1983). We reverse and remand to the district court with instructions to enter judgment for defendants.

Defendants are responsible for issuing and administering oil and gas leases for federal lands, see 30 U.S.C. §§ 181, 223-237, and for approving issuance of and administering such leases for lands allotted to Indians and tribal lands. See 25 U.S.C. §§ 396-396g. Congress has directed defendants to “establish a comprehensive inspection, collection and fiscal and production accounting and auditing system to provide the capability to accurately determine oil and gas royalties, interest, fines, penalties, fees, deposits, and other payments owed, and to collect and account for such amounts in a timely manner.” 30 U.S.C. § 1711(a). Further, defendants are required to “audit and reconcile, to the extent practicable, all current and past lease accounts for leases of oil or gas and take appropriate actions to make additional collections or refunds as warranted, ... and may also audit accounts and records of selected lessees and operators.” Id. § 1711(c)(1).

Plaintiff holds oil and gas leases for both federal and Indian lands. These leases contain an inspection clause which requires, in relevant part, that the lessee “keep open ... for the inspection of any duly authorized officer of the Department ... all books, accounts, maps and records relative to operations and surveys or investigations on the leased lands or under the lease.” As a lessee of oil and gas rights, plaintiff is required to “establish and maintain any records, make any reports, and provide any information that the Secretary may, by rule, reasonably require for the purpose of implementing this chapter or determining compliance with rules or orders under this chapter.” 30 U.S.C. § 1713(a). Further, “[u]pon the request of any officer or employee duly designated by the Secretary ... the appropriate records, reports, or information which may be required by this section shall be made available for inspection and duplication....” Id. Plaintiff is also required to maintain records of its oil and gas leases for six years after the records are generated “unless the Secretary notifies [plaintiff] that he has initiated an audit or investigation involving such records and that such records must be maintained for a longer [259]*259period.”1 Id. § 1713(b).

On September 30, 1988, defendants ordered plaintiff to provide records relating to thirty-two leases for the period October 1, 1980, through September 30, 1983. The order stated that plaintiff previously had been notified of an impending audit for the period October 1, 1980 through September 30, 1986, and that this particular order pertained only to the first segment of the audit. The stated purpose of the audit was to ascertain “the propriety of the royalty payments made by [plaintiff].”

On October 28, 1988, plaintiff filed the present action seeking declaratory and in-junctive relief. The complaint contended that, pursuant to the general federal statute of limitations, 28 U.S.C. § 2415, defendants must audit and file claims for underpayment or mispayment of royalties within six years after royalty payments are made or due. Plaintiff sought a judgment that the order which requested records that were more than six years old was unenforceable, arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with law.2 See 5 U.S.C. § 706 (scope of judicial review of agency actions). Plaintiff argued that a cause of action on royalty payments accrues at the time of payment; therefore, any cause of action on payments made more than six years earlier was barred by the statute of limitations. As plaintiffs argument goes, the six-year limitation on maintaining records deprived defendants of their authority to audit records that were more than six years old.

On cross-motions for summary judgment, the district court denied defendants’ motion3 and granted plaintiff’s motion. The district court declared that there was no authority for defendants’ action unless they could show that the statute of limitations was tolled. The district court determined that the statute was not tolled and granted the declaratory relief requested by plaintiff because defendants’ request for records was untimely.4

Congress has vested federal courts with the power to review agency actions. 5 U.S.C. § 704. However, the scope of review is a “narrow one.” Edwards v. Califano, 619 F.2d 865, 868 (10th Cir.1980). The fact that plaintiff has brought this action not on appeal from an administrative ruling but rather as a preemptive declaratory action makes no difference as to the substantial deference we afford to the actions of administrative agencies in compliance with their statutory enforcement obligations. Indeed, unless the agency’s order can be considered “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A), we cannot set it aside.

The district court viewed the six-year limitation on the record keeping requirement and the six-year statute of limitations on actions to collect royalty payments as dispositive on whether defendants could compel disclosure of the records. The district court framed the issue as “whether [defendants] must audit and file claims for underpayment or mispayment of royalties within 6 years after the royalty payments are made or due.” We cannot agree with that characterization.

Defendants were not asserting a claim for underpayment of royalties. Had they been, plaintiff might have very well been able to assert a statute of limitations defense. See 28 U.S.C. § 2415 (six-year stat[260]*260ute of limitations on “action for money damages brought by the United States ... which is founded upon any contract).

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951 F.2d 257, 1991 WL 251578, Counsel Stack Legal Research, https://law.counselstack.com/opinion/phillips-petroleum-co-v-lujan-ca10-1991.