Maralex Resources, Inc. et al v. Jewell et al
Filing
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ORDER Affirming in Part and Rejecting in Part Agency Determination, by Judge Christine M. Arguello on 3/21/19. (sgrim)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 15-cv-001893-CMA
MARALEX RESOURCES, INC., a Colorado corporation,
ALEXIS M. O’HARE, and
MARY C. O’HARE,
Plaintiffs,
v.
DAVID BARNHARDT, in his official capacity as Acting Secretary of the United States
Department of the Interior,1
THE UNITED STATES DEPARTMENT OF THE INTERIOR, and
THE UNITED STATES OF AMERICA,
Defendants.
ORDER AFFIRMING IN PART AND REJECTING IN PART AGENCY
DETERMINATION
This matter is before the Court upon the Court of Appeals for the Tenth Circuit’s
Opinion (Doc. # 39) reversing and remanding this Court’s Order Affirming Agency
Determination (Doc. # 31). Consistent with the Court of Appeals’ Order, the Court now
affirms in part and rejects in part determinations of the Department of the Interior and its
Interior Board of Land Appeals (“IBLA”). It affirms the IBLA’s conclusion that the Bureau
of Land Management (“BLM”) had authority to inspect the wells at issue, owned by
Plaintiff Maralex Resources, Inc. (“Maralex”). However, the BLM lacks authority to
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In accordance with Federal Rule of Civil Procedure 25(d), the Court orders that David
Barnhardt, Acting Secretary of the Department of the Interior, be substituted for Ryan Zinke and
Sally Jewell, former Secretaries of the Department of the Interior.
require an operator or landowner to provide it with a key to the landowner’s locked
gates or to allow the BLM to place its own locks on the landowner’s gates.
I.
PROCEDURAL HISTORY
The Court detailed the factual background of this case in its Order Affirming
Agency Determination (Doc. # 31), as did the Court of Appeals when it reversed that
Order in Maralex Resources, Inc. v. Barnhardt, 913 F.3d 1189 (10th Cir. 2019), see
(Doc. # 39). This Court’s previous Order and the Court of Appeals’ Opinion are
incorporated by reference, and the factual background explained therein need not be
repeated here. The Court recounts only the facts necessary to address the Court of
Appeal’s instructions on remand.
Briefly, this matter concerns a 320-acre parcel of land in La Plata County,
Colorado (the “Parcel”). Plaintiffs Alexis O’Hare and Mary O’Hare (together, the
“O’Hares”) own the surface and mineral estate in a 120-acre tract of land (the “O’Hare
Tract”) of the Parcel. In 1995, the O’Hares issued Maralex a private oil and gas lease
for the O’Hare Tract. The Southern Ute Indian Tribe holds the surface and mineral
estate in an 80-acre tract of land of the Parcel; the remainder is privately owned by the
O’Hares and others. In 1996, all parties “communitized” their coal and gas interests in
the Parcel under the terms of a Communitization Agreement, pursuant to which they
agreed to develop and operate the Parcel as a single entity. The Southern Ute Indian
Tribe and the Bureau of Indian Affairs approved the Communitization Agreement on
May 1, 1996.
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The four wells at issue in this matter are operated by Maralex and are located on
the O’Hare Tract, where they are enclosed by fences and locked gates. The four wells
draw minerals from the coal formation below the area’s surface; the production of these
minerals is, under the terms of the Communitization Agreement, allocated to all of the
oil and gas interests, including that of the Southern Ute Indian Tribe.
On February 11, 2013, a BLM technician contacted Maralex to gain access to the
four wells so that he could inspect them. Maralex directed the BLM technician to
Mickey O’Hare, who in turn told the technician that the BLM did not have a right to be on
his land to inspect the wells and that “the surface and minerals were owned by him.”
The BLM technician and a BLM law enforcement officer attempted to inspect the wells
but were blocked from doing so by a locked gate on February 22, 2013.
On February 26, 2013, the BLM issued four Notices of Incidents of
Noncompliance (“INCs”) to Maralex for refusing to allow inspection of the wells. The
BLM alleged in the INCs that Maralex was in violation of 43 C.F.R. § 3162.1(b) and
gave Maralex one month to provide the BLM with access to the wells. A BLM official
wrote on the INCs, “For corrective action, I will need a key to access the location or be
able to put a BLM lock in with it.” This demand for corrective action is central to the
issues before the Court of Appeals and now again before this Court. Maralex and the
O’Hares sent a letter appealing the four INCs to the BLM, which the BLM treated “as a
request for State Director’s review (SDR) . . . under 43 CFR 3165.3.”
On July 9, 2013, the BLM’s Deputy State Director for Energy, Lands, and
Minerals of Colorado replied to each of Maralex’s assertions in a letter. Relevant here,
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the BLM cited the Federal Oil and Gas Royalty Management Act of 1982 (“FOGRMA”),
30 U.S.C. § 1711, as authorizing the BLM to “perform the production related inspection
which necessitates physical access to the subject wells and their associated facilities
without advance notice.” The BLM stated that “the four INCs covering denied access to
the subject wells were properly issued and are upheld” and ordered Maralex to “provide
the BLM Tres Rios Field Office access without advance notice as required by the INCs
and the regulations.” Maralex sent the BLM a Notice of Appeal of the BLM’s July 9,
2013 decision and a Statement of Reasons for Appeal shortly thereafter.
Some two years later, on July 10, 2015, the IBLA issued a written decision
affirming the BLM’s July 9, 2013 decision. See (Doc. # 1-1.) The IBLA relied on
FOGRMA, 30 U.S.C. §§ 1711(a) and 1718(b), as authorizing the BLM’s actions. The
IBLA did not address whether Plaintiffs were required to provide the BLM with a key to
locked gates or to permit the BLM to place its own locks on the gates.
Plaintiffs initiated this action against Defendants on September 1, 2015, seeking
reversal of the IBLA’s decision, as well as declaratory relief. (Doc. # 1.) Relevant here,
Plaintiffs argued in their Opening Brief that, assuming arguendo that the BLM has
authority pursuant to 30 U.S.C. § 1718(b) to conduct inspections of oil and gas facilities
on fee lands without advanced notice, “there is no statutory or regulatory requirement
that an operator or landowner provide the BLM with a key to the landowner’s locked
gates or allow the BLM to place its own locks on the landowner’s locked gates.” (Doc.
# 21 at 19–21.) Plaintiffs also argued that if such a requirement existed, it would
constitute “an unreasonable search and seizure of [the landowner’s] fee lands in
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violation of their rights guaranteed by the Fourth Amendment” and would constitute “a
physical taking of [the landowner’s] property in violation of their substantive due process
rights guaranteed by the Takings Clause of the Fifth Amendment.” (Id. at 21–24.)
The Court held in its October 19, 2017 Order Affirming Agency Determination
that the IBLA’s “finding that [FOGRMA] authorizes [BLM] representatives to conduct
warrantless, unannounced inspections of oil wells on Plaintiffs’ fee lands was not
arbitrary, capricious, or otherwise contrary to law.” (Doc. # 31 at 1.) The Court declined
to address Plaintiffs’ statutory and constitutional concerns about the corrective action
the BLM ordered—keys to Plaintiffs’ locks or access to put its own locks on Plaintiffs’
gates—because Plaintiffs “did not present to the IBLA th[at] particular argument” and
thereby waived it for purposes of the appeal. (Id. at 11–12.)
Plaintiffs appealed this Court’s Order Affirming Agency Determination to the
Court of Appeals on November 17, 2017. See (Doc. # 34.)
II.
A.
DISCUSSION
THE COURT OF APPEALS’ OPINION
Plaintiffs raised two issues on appeal:
(1) whether they waived their argument that the BLM lacked authority to
require them to provide the BLM with keys to the locked gates on the
O’Hares’ private property or, alternatively, to allow the BLM to place its own
locks on those gates; and (2) whether the BLM has statutory or regulatory
authority to require plaintiffs to provide the BLM with keys to locked gates
on privately-owned lands or, alternatively, to allow the BLM to place its own
locks on such gates
Maralex, 913 F.3d at 1195–96.
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As to the first issue, the Court of Appeals stated that “it is a close question
whether [P]laintiffs presented their argument to the IBLA that BLM exceeded its
statutory and regulatory authority by requiring a key or lock in the INCs.” Id. at 1196–
97. The Court of Appeals “nevertheless [chose] to exercise [its] discretion to address
that issue” on the grounds that doing so was in “the interests of justice.” Id. at 1197–98.
The Court of Appeals began by “examining the overall statutory and regulatory
scheme for inspections of oil and gas lease sites that implicate Indian mineral interests.”
Id. at 1199. It held that Section 1718(b) of FOGRMA “does not afford the BLM with
authority to inspect lease sites on privately-owned lands,” such as the O’Hare Tract. Id.
at 1201. However, it determined that the regulatory provisions issued by the Secretary
of the Department of the Interior allow that “for lease sites on privately-owned lands,
BLM representatives may not independently enter the sites, but instead must seek entry
(but do not have to give advance notice) from the operating rights owner or operator
and the operating rights owner or operator . . . is obligated to allow such entry.” Id. at
1203. The Court of Appeals held that accordingly, “the BLM had authority to inspect the
wells at issue.” Id.
Turning to the merits of the second issue on appeal, the Court of Appeals then
considered “whether BLM had authority to require Maralex to provide BLM with ‘a key to
access the location or’ allow BLM to install its own locks.” Id. at 1203–04. Citing two
regulations outlining “the parameters of inspections of lease sites on privately-owned
lands,” 30 C.F.R. §§ 3162.1 and 3163.3, the Court of Appeals explained that the
regulations do not provide any authority for the BLM to require a landowner or operator
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“to (a) provide BLM with a key to a lease site on privately-owned land, or (b) to install a
BLM-lock on the gates to such a lease site.” Id. at 1204. Rather, the BLM “must rely on
the operating rights owner or operator to afford them entry to [a] lease site.” Id.
The Court of Appeals concluded:
We REVERSE and REMAND to the district court with directions to enter
judgment in favor of plaintiffs on their claim that the BLM lacks authority to
require plaintiffs to provide the BLM with a key to access the wells at issue
or to allow BLM to install its own locks.
Id.
B.
AMENDED JUDGMENT ON REMAND
On remand, the Court first observes that, in its holding that “the BLM had
authority to inspect the wells at issue,” id. at 1203, the Court of Appeals implicitly agreed
with this Court’s conclusion that “the IBLA’s finding that FOGRMA grants the BLM
representatives warrantless, unannounced authority to inspect the wells on Plaintiffs’
fee lands was not arbitrary, capricious, or otherwise contrary to law” (Doc. # 31 at 15).
The Court therefore need not amend its judgment to the extent it upheld the BLM’s
authority to inspect Plaintiffs’ wells.
However, the Court of Appeals explicitly reversed this Court’s assessment of
Plaintiffs’ argument that the BLM was without authority to impose the corrective action—
the keys or locks requirement—it had ordered in the four INCs. Maralex, 913 F.3d at
1204. The Court accordingly amends its judgment regarding the corrective action. It
finds in favor Plaintiffs on their argument that the BLM lacks authority to require them to
provide the BLM with a key to access the wells at issue or to allow the BLM to install its
own locks, consistent with the Court of Appeals’ analysis.
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III.
CONCLUSION
The Court reaffirms that the IBLA’s finding that FOGRMA grants the BLM
authority to conduct warrantless, unannounced inspections of Plaintiffs’ four wells was
not arbitrary, capricious, or otherwise contrary to law.
However, the Court now holds that the BLM was without authority to require
Plaintiffs to provide the BLM with a key to access the at-issue wells or to allow BLM to
install its own locks. Its INCs imposing such corrective action, and the reviews thereof,
were contrary to law to the extent they required keys or locks.
In sum, the Court now AFFIRMS IN PART and REJECTS IN PART
determinations of the Department of the Interior and its IBLA.
The parties shall bear their own fees and costs.
DATED: March 21, 2019
BY THE COURT:
_______________________________
CHRISTINE M. ARGUELLO
United States District Judge
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