BP America Production Co. v. Haaland.
No. 22-8024. 12/6/2023. D.Wyo. Judge Phillips. Felon in Possession of Ammunition—US Sentencing Guidelines—Sentence Enhancements—Nexus—Fed. R. Civ. Proc. 23.
December 6, 2023
BP America Production Company (BP) held more than 20 federal leases for natural gas deposits in the Jonah Field between 2008 and 2012. BP conveyed the record title, operating rights, and royalty obligations for its Jonah Field leases to Linn Energy Holdings, LLC, effective April 1, 2012. BP and Linn Energy delayed filing the required forms with the Bureau of Land Management (BLM) for BLM’s necessary approval, but the BLM subsequently approved the transfers. For royalty-payment purposes, the BLM set effective dates of October 1, 2012, for the transfers filed in September, and of November 1, 2012, for the transfers filed in October. The State of Wyoming’s Mineral Audit Division (State) then audited BP’s federal royalty payments for the Jonah Field between 2008 and 2012. In 2016, the State notified BP that BP owed underpayments of more than $2.4 million for 2012. BP objected to the 2012 audit results, and the State agreed to reduce the 2012 royalty underpayment to $2,023,436.71. BP began to pay the underpayment, but later advised the State that it would stop paying the underpayments assessed for April to October 2012, claiming that Linn Energy should be responsible for those months because the properties were sold to Linn with an effective date of April 2012. By December 2016, BP completed payment of its royalty underpayments for 2008 to March 2012, but it withheld the remaining balance. The individual royalty underpayments totaled $1,031,377.23, and most of the individual royalty underpayments were less than $10,000.
In 2017, the State ordered BP to pay the remaining royalty underpayments, ruling that BP remained liable for the royalty underpayments from April to October 2012 because the BLM had not approved BP’s transfer to Linn Energy until November 1, 2012, since BP and Linn Energy delayed in filing the necessary forms with the BLM. BP appealed the State’s order to the Department of the Interior’s Office of Natural Resources Revenue (ONRR). Notably, BP did not challenge the State’s aggregation of the individually assessed royalty obligations into a single monetary obligation of $1,031,377.23. The ONRR director affirmed the State’s order with an amended royalty due amount of $905,348.24. BP then appealed to the Department of the Interior’s Board of Land Appeals (IBLA), which has delegated authority from the Secretary of the Interior (Secretary) to make final agency decisions. The parties jointly agreed to extend the Secretary’s 33-month statutory period for issuing a decision to December 2, 2020, and on that date, the Secretary opted for a “deemed” final decision rather than issue her own written decision. A week later, the IBLA issued another order formally dismissing BP’s appeal. BP timely appealed the IBLA’s final agency action in US district court, arguing that under § 1724(h)(2)(A), the Secretary’s deemed final decision released BP from paying the 432 royalty-underpayment obligations that were less than $10,000, reducing its total underpayment to $218,576.49. The district court affirmed the Secretary’s deemed final agency decision.
On appeal, BP asserted that the district court erred by reading “monetary obligation” as used in 30 USC § 1724(h)(2)(A) and (B) to mean the aggregated monetary obligation of BP’s individual royalty obligations totaling $905,348.24. BP argued that the statute compels reversal of all individual royalty underpayments less than $10,000, despite those underpayments being correctly calculated and assessed. Under § 1724(h)(2)(A), if the Secretary does not issue an opinion within the 33-month period, the Secretary is deemed to have issued a decision in the appellant’s favor as to a monetary obligation with a principal amount of less than $10,000, and under § 1724(h)(2)(B), if the Secretary does not issue an opinion within the 33-month period, the Secretary is deemed to have issued a final decision in favor of the Secretary, which decision is deemed to affirm the issues that the agency rendered a decision on before the end of such period, as to a monetary obligation with a principal amount of $10,000 or more. The Tenth Circuit initially determined that the term “monetary obligation” is ambiguous in this context, which involves multiple assessed royalty obligations, some more than $10,000, some less. It concluded that a “monetary obligation” is a lessee’s duty to pay any obligation in any order. Here, BP challenged its liability for the collective amount of the royalty obligations based on one issue—the effective date of the lease transfers. And because that issue determined BP’s liability for all the outstanding royalty payments, the total “monetary obligation” implicated by BP’s appeal was $905,348.24. Therefore, the district court correctly ruled under § 1724(h)(2)(B) that BP was liable for a single monetary obligation of $905,348.24.
BP further contended that all deemed final decisions by the Secretary violate the Administrative Procedure Act because these decisions are silent and lack an articulated basis for an agency decision to be upheld. However, under 30 USC § 1724(h)(2)(B), for appeals with a monetary obligation of $10,000 or more, the Secretary’s deemed final decision adopts the ONRR Director’s decision on the issues raised, so the Secretary’s deemed final decision is not “silent.”
The decision was affirmed.