Valley Camp of Utah, Inc. v. Babbitt

24 F.3d 1263, 1994 WL 195522
CourtCourt of Appeals for the Tenth Circuit
DecidedMay 20, 1994
DocketNo. 93-4067
StatusPublished
Cited by14 cases

This text of 24 F.3d 1263 (Valley Camp of Utah, Inc. v. Babbitt) 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
Valley Camp of Utah, Inc. v. Babbitt, 24 F.3d 1263, 1994 WL 195522 (10th Cir. 1994).

Opinion

PAUL KELLY, Jr., Circuit Judge.

Plaintiff-appellant Valley Camp, Inc. (Valley Camp) appeals from the district court’s grant of summary judgment affirming an Interior Board of Land Appeals (IBLA) decision in favor of defendants-appellees. We have jurisdiction pursuant to 28 U.S.C. § 1291 and we reverse and remand.

Background

This appeal arises from the Bureau of Land Management’s (BLM) attempt in 1982 to readjust the royalty rate on a federal coal lease which covered two separate mines owned and operated by two separate entities. Pursuant to 43 C.F.R. § 3451.1(c)(1) (1981), the BLM notified the lessee of record in 1981 of its intention to readjust the lease. In 1986, after various administrative proceedings, the BLM implemented a readjusted royalty rate retroactive to 1982. The lessee of record then appealed to the IBLA. When a sublessee of the affected lands, Valley Camp, received notice of deficient royalty payments covering its separate operations for the period 1982 through 1986, it sought to intervene in the district court appeal but was denied. Pursuant to a Memorandum of Understanding (MOU) between the IBLA and Coastal States, the operator of one of the mining operations and the lessee of record, the appeal was abandoned and a decision issued stating that the lease, as amended, was effective from May 1, 1982. A copy of this decision was sent to Valley Camp which again protested to the BLM, arguing that the BLM had not made necessary predicate determinations regarding its output to readjust the royalty rate. The BLM rejected this argument, reasoning that Valley Camp had no right to participate in readjustment negotiations, given its lack of privity with the BLM as a result of its status as sublessee. The IBLA affirmed the BLM’s action. The district court granted summary judgment in favor of the BLM, and Valley Camp appealed.

A. Interests in the Lease

On March 1, 1962, the United States leased coal lands located in Carbon and Emery Counties, Utah, lease number 020305 (hereinafter “the lease”), to Emmett K. Olson. The lease reserved to the government the right to receive royalty payments on the coal recovered from the leased lands, as well as the right reasonably to readjust any term of the lease after twenty years and every twenty years thereafter. The lease also provided that the “lessee hereby agrees: ... [t]o file for approval [with the BLM], within 90 days from the date of execution, any assignment or transfer made of this lease, whether by direct assignment, operating agreement, working or royalty interest, or otherwise.” Aplt.App. at 67.

Mr. Olson, on April- 24, 1962, assigned the lease to Malcolm N. McKinnon. This assignment was approved by the BLM on July 20, [1266]*12661962. On May 10, 1974, Mr. McKinnon entered into an option agreement with Oak Creek Development (Oak Creek) whereby Oak Creek was given the right to prospect for coal on the subject lease for a period of one year, with an option to acquire a sublease of the lands at the conclusion of the prospecting period. Additionally, if certain payments under the sublease were made, Mr. McKinnon also agreed to execute an assignment of the record title to the lease. The option agreement could not be assigned without the permission of Mr. McKinnon.

On August 1, 1974, Oak Creek, with Mr. McKinnon’s approval, assigned all its rights in the option agreement to Routt County Development (Routt County). Routt County, on September 15, 1975, subleased a part of the property, known as the O’Connor block, to Energy Fuels, reserving an overriding royalty interest in the coal production from this portion of the land. On October 29, 1975, Routt County exercised its option with Mr. McKinnon.

Pursuant to a September 15, 1975 exchange agreement concerning various federal coal leases, Energy Fuels, on November 5, 1975, assigned its interest in the O’Connor block to Valley Camp. On August 2, 1978, Routt County, successor to Energy Fuels, assigned the exchange agreement, subject to Valley Camp’s interest, to Coastal States. On August 3, 1978, Coastal States also received an assignment from Routt County of all its rights in the September 15, 1975 sublease to Energy Fuels, again subject to the earlier Valley Camp assignment. As a result, Valley Camp and Coastal States became co-operators on the lease, with Valley Camp operating the Belina mine on the O’Connor block and Coastal States operating the Skyline mine on the remainder of the property known as the Connelville block. All of the foregoing instruments were submitted to the BLM in a timely fashion and each was approved.

During late 1982, after all payments contemplated by the Routt County sublease were made, Mr. McKinnon assigned the record title to the lease to Routt County, which immediately assigned record title to Coastal States pursuant to the earlier agreements. These transfers were approved by the BLM in early 1983, and, as a result, Coastal States became lessee of record for Utah-020305.

B. Readjustment of the Royalty Rate for the Lease

By letter dated October 7, 1981, the BLM notified Mr. McKinnon, as lessee of record, of its intention to readjust the terms of the lease, effective March 1,1982, pursuant to 43 C.F.R. 3451 (1981). The BLM sent copies of this notice to all interested owners, including Valley Camp. On February 22, 1982, the BLM sent notice of the proposed terms of the readjustment to Mr. McKinnon and copies to all interest owners, including Valley Camp. Mr. McKinnon timely filed objections to the proposed readjustment with the BLM. The BLM overruled these objections in part and sustained them in part when it entered its decision implementing the new royalty rate on November 10, 1982. Mr. McKinnon appealed this decision to the IBLA, arguing, among other things, that the BLM had failed to consider a royalty rate of less than 8% for underground production of coal as provided by 30 U.S.C. § 207(a) (1982).

The IBLA affirmed the BLM’s decision with regard to the readjusted royalty rate but reversed in part, on other grounds, and remanded. On May 28, 1985, the BLM issued its decision implementing the IBLA’s decision. Valley Camp did not receive a copy of the implementation decision. Subsequently, in an unrelated case, the Tenth Circuit held that the BLM could not automatically readjust production royalty rates to 8% without regard to specific production capacities of the leased land, as required by 43 C.F.R. 3473.3-2(a)(3) (1979). Coastal States Energy Co. v. Hodel, 816 F.2d 502, 507 (10th Cir.1987). Coastal States, as substituted party-appellant, appealed from the BLM’s 1985 decision, arguing, among other things, that the BLM had erred in automatically readjusting the royalty rate in light of the Tenth Circuit’s recent decision.

Upon learning of the implementation decision and Coastal States’ appeal therefrom, Valley Camp moved to intervene in the appeal. Valley Camp was again rebuffed. In an October 18, 1988, decision, the IBLA set [1267]

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Valley Camp Of Utah, Inc. v. Babbitt
24 F.3d 1263 (Tenth Circuit, 1994)

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Bluebook (online)
24 F.3d 1263, 1994 WL 195522, Counsel Stack Legal Research, https://law.counselstack.com/opinion/valley-camp-of-utah-inc-v-babbitt-ca10-1994.