Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-90-08025/USCOURTS-ca10-90-08025-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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PUBLISH 

FILED 

Unitzd St<ttf-~· Unr-.-: •. r>:ii,:., 'J',.,..,H, ~;.,.<'V.it 

JAN 15 1991 

UNITED STATES COURT OF APPEALS ROBERT L. HOECKER 

Clerk 

FOR THE TENTH CIRCUIT 

TRAPPER MINING INC., ) 

) 

Plaintiff-Appellant, ) 

) 

v. ) 

) 

MANUEL LUJAN, JR., NEIL MORCK, ) 

BRUCE HARRIS, and R.W. MULLIN, ) 

) 

Defendants-Appellees. ) 

WYODAK RESOURCES DEVELOPMENT ) 

CORP., ) 

) 

Plaintiff-Appellee, ). 

) 

v. ) 

) 

MANUEL LUJAN, JR., Secretary ) 

of the Department of Interior; ) 

and WILLIAM H. LEE, Chief, ) 

Branch of Mining Law and Solid ) 

Minerals, Wyoming State Office ) 

Bureau of Land Management, ) 

United States Department of the) 

Interior, ) 

) 

Defendants-Appellants. ) 

No. 89-1372 

Appeal from the 

United States Di$trict Court 

For the District of Colorado 

(D.C. No. 88-Z-1812) 

No. 90-8025 

Appeal from the 

United States District Court 

For the District of Wyoming 

(D.C. No. 89-0057J) 

Richard L. Fanyo (Sasha A. Karpov with him on the briefs) of 

Welborn Dufford Brown & Tooley, P.C., Denver, Colorado, for 

Plaintiff-Appellant Trapper Mining Inc. 

Appellate Case: 90-8025 Document: 010110016211 Date Filed: 01/15/1991 Page: 1 
Evelyn Ying of the Department of Justice (Myles E .. Flint, Deputy 

Assistant Attorney General; Martin w. Matzen and Jean A. Kingrey, 

of the Department of Justice: Steve Brown and Lyle Rising of the 

Department of the Interior, Washington, D.C., with her on the 

brief), Washington, D.C., for Defendants-Appellees Manuel Lujan, 

Jr., et al. 

Evelyn Ying of the Department of Justice (George w. Van Cleve, 

Acting Assistant Attorney General; Martin w. Matzen and Jean A. 

Kingrey, of the Department of Justice: Steve Brown and Lyle Rising 

of the Department of the Interior, Washington, D.C., with her on 

the briefs), Washington, D.C., for Defendant-Appellant Manuel 

Lujan, Jr., et al. 

Timothy L. Thomas of Morrill Brown & Thomas, Rapid City, South 

Dakota, for Plaintiff-Appellee Wyodak Resources Development Corp. 

Before LOGAN and MOORE, Circuit Judges, and GREENE, District 

Judge.* 

MOORE, Circuit Judge. 

*Honorable J. Thomas Greene, United States District Judge for the 

District of Utah, sitting by designation. 

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Appellate Case: 90-8025 Document: 010110016211 Date Filed: 01/15/1991 Page: 2 
In this consolidated appeal, the question before us is 

whether the Federal Coal Leasing .Amendments Act (FCLAA) 

automatically converts the twenty-year readjustment interval in 

pre-FCLAA coal leases to ten-year intervals .at the first postFCLAA readjustment date. In a suit brought by Trapper Mining 

Inc., the United States District Court for the District of 

Colorado concluded that it does. Faced with the identical issue 

in a suit brought by Wyodak Resources Development Corp., the 

United States District Court for the District of Wyoming reached 

the opposite result, holding that the Secretary of the Interior 

must adopt the new interval through a readjustment. We affirm the 

judgment of the Colorado District Court and reverse the judgment 

of the Wyoming District Court. 

I. FACTUAL AND LEGAL BACKGROUND 

The United States, acting through the Bureau of Land Management (BLM) and the Secretary of the Interior (the Secretary), 

granted coal leases to Trapper Mining Inc.'s predecessor in 

interest1 on June 1, 1958, and to Wyodak Resources Development 

Corp. on May 1, 1959. The leases provided for twenty-year 

intervals at which the Secretary could readjust terms, qualified 

by the clause "unless otherwise provided by law." 

of each lease reserves to the lessor 

Section 3(d) 

1The leases were originally issued to Utah Construction Co., later 

renamed Utah International Co. Utah International then subleased 

them to Trapper and later assigned the leases to General Electric 

Holdings, Inc. In 1988, General Electric assigned the leases to 

Trapper. 

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[t]he right reasonably to readjust .•. terms and 

conditions at the end of 20 years from the date hereof 

and thereafter at the end of each succeeding 20-year 

period during the continuance of this lease unless 

otherwise provided by law at the time of the expiration 

of any such period. 

The introductory paragraph of the leases also incorporates§ 7 of 

the Mineral Lands Leasing Act (MLLA) of 1920, as amended, 30 

U.S.C. § 207 (1958), which provided similarly that the leases 

shall be for indeterminate periods upon condition ... that at the end of each 20-year period succeeding the 

date of the lease such readjustment of terms and conditions may be made as the Secretary of the Interior may 

determine, unless otherwise provided by law at the time 

of the expiration of such periods. 

In 1976, Congress amended the law, replacing§ 7 of MLLA with 

§ 6 of FCLAA. One of the changes instituted by§ 6 is a shorter 

readjustment interval of ·ten years. Section 6 provides in part 

that 

rentals and royalties and other terms and conditions of 

the lease will be subject to readjustment at the end of 

its primary term of twenty years and at the end of each 

ten-year period thereafter if the lease is extended. 

The first scheduled readjustment opportunities for Trapper's 

and Wyodak's leases occurred in 1978 and 1979, respectively, the 

twentieth anniversaries of the leases. The BLM failed to take 

advantage of either of these opportunities, sending untimely 

notice to Trapper in 1979 and never sending actual changes in 

terms and conditions to Wyodak despite timely notice. The BLM 

subsequently notified Trapper and Wyodak (lessees) that their 

leases would be readjusted in 1988 and 1989, respectively, ten 

years after the twentieth anniversaries of the leases. The 

lessees objected that the ten-year interval cannot apply to their 

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leases because the Secretary did not adopt it through a readjustment at the previous opportunities. 

After the BLM and Interior Board of Land Appeals (IBLA) 

rejected their complaints, the lessees filed suits for declaratory 

and injunctive relief to prevent readjustment until 1998 and 1999. 

On cross-motions for summary judgment, the Colorado District Court 

dismissed Trapper's case in a bench ruling. However, the Wyoming 

District Court granted Wyodak's requested relief, also on crossmotions for summary judgment. 

II. STANDARD OF REVIEW 

When a matter comes to us after summary judgment, we apply 

the same standards employed by the trial court under Fed. R. Civ. 

P. 56(c). Osgood v. State Farm Mut. Auto. Ins. Co., 848 F.2d 

141, 143 (10th Cir. 1988). Since no material factual disputes 

exist, we consider de IlQY.Q which party is entitled to judgment as 

a matter of law. 

Section 706 of the Administrative Procedure Act, 5 U.S.C., 

provides the basis for our review of the Secretary's actions. We 

"decide all relevant questions of law," setting aside agency 

determinations if they are "not in accordance with the law" or are 

"in excess of statutory jurisdiction, authority, or limitations." 

III. APPLICATION OF FCLAA 

This dispute concerns the proper readjustment interval for 

pre-FCLAA leases, absent a readjustment by the Secretary at the 

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first post-FCLAA opportunity. We have never faced this combination of circumstances before, but we have examined the readjustment interval and the effect of FCLAA on pre-FCLAA leases in other 

contexts. 

In Rosebud Coal Sales Co. v. Andrus, a lease was due for 

readjustment in 1975 and the Secretary improperly attempted to 

readjust it two and one-half years later in 1977. We held that 

the Secretary waives his readjustment opportunity by failing to 

act, precluding readjustment until the next scheduled opportunity. 

667 F.2d 949, 952 (10th Cir. 1982). The twenty-year readjustment 

interval gave "a right to the Government in the nature of an option to make adjustments it considers necessary or to let the opportunity pass .... The opportunity comes at intervals albeit 

long but so prescribed by Congress." Id. at 951. 

We also established in Rosebud that FCLAA cannot apply to 

pre-FCLAA leases via pre-FCLAA readjustment opportunities. The 

passage of FCLAA in 1976, one year after the scheduled readjustment, did not justify the Secretary's belated action as an effort 

to make the lease conform to FCLAA. Such a result would amount to 

a retroactive application of FCLAA which Congress never intended. 

Id. at 952. 

Our next encounter with FCLAA's application to pre-FCLAA 

leases arose when the Secretary sought to apply FCLAA on postFCLAA readjustment dates. In companion cases, we held that the 

Secretary not only can but also must impose FCLAA's mandatory 

terms at post-FCLAA readjustment opportunities. FMC Wyoming 

Corp. v. Hodel, 816 F.2d 496 (10th Cir. 1987), cert. denied, 484 

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U.S. 1041 (1988); Coastal States Energy Co. v. Hodel, 816 F.2d 502 

(10th Cir. 1987). In FMC, we reasoned first that the language 

"unless otherwise provided by law" in the original leases left the 

Secretary's right to readjust subject to later statutory changes 

by Congress. Then we noted that§ 6 of FCLAA, in effect when 

FMC's leases came up for readjustment, required a royalty rate of 

not less than 121⁄2%. We concluded that the Secretary had no choice 

but to impose a minimum royalty rate of 121⁄2%. FMC, 816 F.2d at 

501. We arrived at the same result in Coastal for other terms 

mandated by FCLAA, including the change in readjustment interval. 

However, the same analysis yielded a different result for the 

underground coal royalty rate. Section 6 excepts underground coal 

from the mandatory 121⁄2% rate. Therefore, the Secretary erred in 

automatically applying an 8% rate without even considering a 

lesser one. Coastal, 816 F.2d at 508. 

Tenth Circuit precedent thus establishes (1) when the 

Secretary waives a pre-FCLAA readjustment opportunity, he cannot 

arbitrarily choose the next readjustment interval, and (2) when 

the Secretary undertakes a post-FCLAA readjustment of a pre-FCLAA 

lease, he must adopt the readjustment interval prescribed by 

Congress in FCLAA. 

The question before us now is whether FCLAA's ten-year 

readjustment interval takes effect automatically when the 

Secretary waives the first post-FCLAA readjustment opportunity. 

Applying the same two-step reasoning we used in FMC and Coastal, 

we conclude that Congress has the authority to change the 

readjustment interval by statute and exercised that authority in 

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FCLAA. The Secretary was thus entitled to readjust Trapper's 

leases in 1988 and Wyodak's in 1989. 

A. Congressional Authority to Alter Interval 

The lease agreements between the government and the lessees 

created commercial relationships governed by contract law. 

Rosebud, 667 F.2d at 951. Congress is entitled to modify such 

contracts through subsequent legislation unless the right is 

"'surrendered in unmistakable terms.'" Bowen v. Agencies Opposed 

to Social Security Entrapment, 477 U.S. 41, 52 (1986) (citing 

Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982)). The 

Supreme Court has repeatedly warned that interpretations of 

contracts which would immunize them from the sovereign power of 

the United States to change its laws should be avoided if possible. Bowen, 477 U.S. at 52-53. 

In 

to the 

Bowen, the Supreme Court held constitutional an amendment 

Social Security Act which affected state contractual 

rights. The original Social Security Act had reserved "[t]he 

right to alter, amend, or repeal any provision." 42 u.s.c. 

§ 1304. In the present cases,§ 7 of the MLLA and§ 3(d) of the 

leases reserve to Congress the power to change the readjustment 

interval. The leases are subject to readjustment by the Secretary 

every twenty years "unless otherwise provided by law" at the end 

of such a period. We believe that exception allows Congress to 

change the readjustment interval to ten years independent of any 

action by the Secretary. 

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The lessees argue that the exception only reserves to 

Congress control over the Secretary's right to readjust terms, not 

direct control over specific terms. They assume that Congress 

delegated control of lease terms to the Secretary, retaining only 

the right to alter the Secretary's power to readjust. In FMC and 

Coastal, we determined that the clause "unless otherwise provided 

by law" preserves Congress' right not only to take away from the 

Secretary the power to readjust but also to circumscribe that 

power by requiring adoption of specific terms upon readjustment. 2 

Neither FMC nor Coa·stal purported to limit the clause to those two 

meanings. As the D.C. Circuit recently noted, it can have 

multiple meanings: 

It might ... modify only the phrase "and thereafter at 

the end of each succeeding 20-year period during the 

continuance of this lease," meaning that lease readjustments would take place every twenty years, unless 

Congress by law required them to take place at some 

other interval. It might, on the other hand, modify the 

whole of the clause that precedes it, which would 

presumably mean that the lessor reserves the right to 

readjust the lease, except that Congress may provide by 

law that there shall be no readjustment. It might 

modify the phrase "reasonably to readjust," and thus 

mean that the lessor reserves the right reasonably to 

readjust the lease, except that Congress may provide by 

2specifically, we stated in FMC: 

We do not interpret the language in MLLA (1920), which 

was incorporated verbatim in the two leases here 

involved, as only meaning that the Secretary on an anniversary date may readjust unless the law in effect at 

the time of readjustment has taken that right away. It 

no doubt covers that possibility. But in our view it 

also permits Congress to allow the Secretary to continue 

to have the right to readjust, but at the same time 

circumscribe that right by enacting, for example, a 

revised minimum royalty rate. 

Footnote 6 in Coastal is virtually identical. FMC, 816 F.2d at 

501, n.9; Coastal, 816 F.2d at 505, n.6. 

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law for a specific readjustment of its choosing, even 

one that would have been unreasonable for the Secretary 

to make on his own under the prior law. 

The D.C. Circuit held that one meaning of the clause is that 

Congress can require the Secretary to impose certain terms on preFCLAA leases during readjustment. Western Fuels-Utah, Inc. v. 

Lujan, 895 F.2d 780, 788-89 (D.C. Cir.), cert. denied, 111 s. Ct. 

47 (1990). In the present cases, we hold that the breadth of the 

clause makes the first suggested meaning that Congress may 

directly change the interval equally valid. 

B. FCLAA's Effect on Interval 

Whether Congress intended to change the readjustment interval 

directly through§ 6 of FCLAA is a question of statutory construetion. Under Chevron USA, Inc. v. NRDC, 467 U.S. 837, 842-43 

(1984), a court reviewing an agency's construction of a statute 

first makes its own inquiry into the intent of Congress on the 

precise issue. If that intent is ambiguous or nonexistent, then 

the court should defer to the agency's interpretation as long as 

it is reasonable. Because it is clear that Congress intended the 

readjustment interval to become ten years on the first post-FCLAA 

anniversary of pre-FCLAA leases, we need not address the lessees' 

attacks on the consistency of the Secretary's interpretation. 

1. Text 

When these leases came up for readjustment in 1978 and 1979, 

FCLAA was law. Section 6(a) provides in full: 

A coal lease shall be for a term of twenty years 

and for so long thereafter as coal is produced annually 

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in commercial quantities from that lease. Any lease 

which is not producing in commercial quantities at the 

end of ten years shall be terminated. The Secretary 

shall by regulation prescribe annual rentals on leases. 

A lease shall require payment of a royalty in such 

amount as the Secretary shall determine of not less than 

121⁄2 per centum of the value of coal as defined by 

regulation, except the Secretary may determine a lesser 

amount in the case of coal recovered by underground mining operations. The lease shall include such other 

terms and conditions as the Secretary shall determine. 

Such rentals and royalties and other terms and conditions of the lease will be subject to readjustment at 

the end of its primary term of twenty years and at the 

end of each ten-year period thereafter if the lease is 

extended. 

The final sentence of § 6(a) states that leases will be 

subject to readjustment every ten years after the first twentyyear period ends. The provision is self-executing: the language 

is mandatory and directly imposes the new interval rather than 

just modifying the Secretary's authority over the term. The 

mandatory language "will be" reflects Congress' intent to require 

the new interval to take effect. In FMC and Coastal, we attached 

similar significance to mandatory language, holding that it 

compels the Secretary to impose certain terms when he undertakes a 

readjustment. 3 

If the Secretary had undertaken readjustments for the present 

leases in 1978 and 1979, he would have had no choice but to adopt 

the ten-year interval, making the leases eligible for readjustment 

again in 1988 and 1989. Although the Secretary did not readjust 

3The one exception to application of mandatory terms rests on our 

recognition in Rosebud that FCLAA cannot apply retroactively to a 

pre-FCLAA lease when its twenty-year anniversary occurs before 

1976. However, applying the new interval to a pre-FCLAA lease on 

a post-FCLAA readjustment date is not retroactive because the 

leases are subject to change at that time. See FMC, 816 F.2d at 

501, n. 10. 

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at those times, the new interval automatically 

because the language directly imposed it. 

language in§ 6 mandating the royalty rate 

took effect then 

In contrast, the 

only affects the 

Secretary's control over the term. It states that "[a] lease 

shall require payment of a royalty in such amount as the Secretary 

shall determine of not less than 121⁄2 per centum." (Emphasis 

added.) This requirement is couched as a restriction on the 

Secretary's power, not as a direct imposition of the new rate. 

We hold that the ten-year interval applies automatically in 

the absence of readjustment by the Secretary. The language not 

only circumscribes the Secretary's actions if he undertakes a 

readjustment but also dictates a certain result. The Secretary 

cannot thwart the intent of Congress by simply not undertaking a 

readjustment. 

The lessees counter this analysis at two levels. First, they 

contend that the clause changing the interval does not apply to 

pre-FCLAA leases because of certain words in § 6. The clause 

refers to leases with "primary" terms of twenty years and requires 

that the lease be "extended" in order for the new interval to apply. The lessees contend that pre-FCLAA leases have indeterminate 

terms and do not need to be extended. However, we have previously 

held that the Secretary can apply FCLAA, including the new 

interval, to pre-FCLAA leases on post-FCLAA readjustment dates. 

The phrase "primary term" simply means the first twenty-year 

period before a lease becomes subject to readjustment. See 

Western Fuels-Utah, 895 F.2d at 784. The phrase "if extended" 

merely reflects that readjustments will only be appropriate while 

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leases remain in force. Coastal, 816 F.2d at 505, 507. The presence of these words does not pose any special obstacle to direct 

application of the terms. 

Second, the lessees insist that even if the clause is 

applicable to pre-FCLAA leases, the new interval cannot apply 

automatically because it only becomes mandatory when the Secretary 

undertakes a reaqjustment. They assume that all terms must be 

changed through a readjustment, and that the Secretary can waive 

the right to readjust any of the terms. Both steps of this 

analysis are flawed. 

The interval must undergo readjustment, the lessees argue, 

because it is no different than three other mandatory terms in 

§ 6: "A coal lease shall be for a term of twenty years 

Any lease which is not producing in commercial quantities at the 

end of ten years shall be terminated .... A lease shall require 

payment of a royalty . of not less than 121⁄2 per 

centum II By focusing on this comparison, the lessees fail 

to see the distinction between mandatory and non-mandatory terms. 

We have never specifically held that mandatory terms must be 

readjusted to take effect. The lessees also fail to recognize 

potential distinctions among the mandatory terms. For example, 

they conveniently ignore the key language distinguishing the 

royalty rate from the interval. Trapper also contrasts the 

language changing the interval to § S(b) of FCLAA, 30 u.s.c. 

§ 202(a)(S), which, Trapper contends, does directly impose terms. 

Section S(b) provides that if a lessee includes a pre-FCLAA lease 

in a logical mining unit, then that lease "shall be subject to the 

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provisions of this section." Trapper argues this provision 

demonstrates how Congress expresses intent to modify a term by law 

without the necessity of readjustment by the Secretary. However, 

this language does not preclude a finding of similar intent in the 

language of§ 6. 

Assuming the interval must go through readjustment, the lessees' next assumption is that the Secretary can waive his option 

to adopt the ten-year interval and did so by failing to readjust 

in 1978 and 1979. The lessees find the right to waive in 

Rosebud's characterization of the Secretary's right to readjust as 

"an option." 667 F. 2d at 951. However, in Rosebud we did not 

treat the readjustment interval as a term waivable by the 

Secretary. Immediately after describing the right to readjust as 

an option, we noted that the interval is "prescribed by Congress." 

Implicit in Rosebud's holding that the Secretary can only readjust 

at times set by Congress is the principle that the Secretary is 

entitled to readjust at all those opportunities. 

2. Legislative History 

The parties have centered much attention on one remark by 

Representative Mink, Chairwoman of the House Subcommittee on Mines 

and Mining, during the House debate on FCLAA. Representative Mink 

stated: "The 533 existing Federal leases would be unaffected by 

the bill except to the extent its provisions are made applicable 

upon the periodic ten-year readjustment of lease terms, or upon 

the inclusion of an existing lease in a logical mining unit." 122 

Cong. Rec. 489 (1976). Our analysis stands without reference to 

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the legislative history, but we note that this remark, contrary to 

the lessees' assertions, supports our conclusion that Congress 

intended to change the readjustment interval by statute. 

Representative Mink's statement expresses an intent for the 

ten-year interval to apply to pre-FCLAA leases, regardless of 

whether the Secretary readjusts other terms. Although the other 

terms of FCLAA must be "made applicable" through readjustment, 

Representative Mink refers to the readjustment interval as a term 

outside the scope of that requirement. Trapper contends that the 

reference to a ten-year readjustment interval merely reflects an 

assumption that the Secretary would validly readjust the interval 

period at the end of the first twenty-year term. Although this is 

pure speculation, such an assumption actually indicates an intent 

to have the new interval take effect at that time since the 

Secretary is required to adopt it. 

IV. WAIVER AND ESTOPPEL CLAIMS OF WYODAK 

Even if the ten-year interval went into effect automatically 

in 1979, giving the Secretary the right to readjust Wyodak's lease 

in 1989, Wyodak argues the Secretary lost that right through 

waiver or estoppal. In a letter dated February 7, 1983, the 

Wyoming State Office of the BLM notified Wyodak that the next 

readjustment would occur in 1999. In 1987, however, the Secretary 

asserted his intention to readjust in 1989. Since the Wyoming 

District Court did not rule on Wyodak's theories of waiver or 

estoppel, we cannot properly review their factual basis. 

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Both theories are legally flawed, however. Wyodak first 

argues that because the Secretary's right to readjust is "in the 

nature of an option," Rosebud, 667 F.2d at 951, the Secretary 

holds· an option contract. Under contract principles, the 

Secretary's letter stating that he would not exercise the option 

to readjust until 1999, combined with Wyodak's reliance on that 

statement, terminated his option to readjust in 1989. This view 

of the lease as an option contract distorts the Rosebud court's 

ordinary use of the word option. An option contract is created 

when the offerer of the option accepts consideration in exchange 

for extending an irrevocable offer. See J. Calamari & J. Perillo, 

Contracts, § 2-25, at 121-22 (3d ed. 1987). The Secretary's option is a right reserved by Congress, not one given by the lessees 

in exchange for consideration. 

Wyodak argues, alternatively, that the Secretary is equitably 

estopped from readjusting the lease in 1988. However, we disfavor 

the application of estoppel against the government when it 

thwarts enforcement of the public laws. Emery Mining Corp. v. 

Secretary of Labor, 744 F.2d 1411, 1416 (10th Cir. 1984). In 

general, "the United States is neither bound nor estopped by acts 

of its officers or agents in entering into an arrangement or 

agreement to do or cause to be done what the law does not sanction 

or permit." Utah Power & Light Co. v. United States, 243 U.S. 

389, 409 (1917) (citations omitted). A party who enters an 

arrangement with the government and relies on an official's 

interpretation of the law "assume[s] the risk that that 

interpretation [is] in error." Emery, 744 F.2d at 1416; see also 

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Heckler v. Community Health Servs., 467 U.S. 51, 63, n.17 (1983). 

In this case, Wyodak took the risk that the 1983 letter from a 

Wyoming official reflected an incorrect interpretation of the law. 

V. CONCLUSION 

We conclude that Congress intended the ten-year readjustment 

interval to apply automatically to pre-FCLAA leases on their postFCLAA anniversaries. The Secretary thus had the right to readjust 

Trapper's leases in 1988 and Wyodak's in 1989. The Secretary did 

not lose the right to readjust Wyodak's lease through waiver or 

estoppel. The judgment of the United States District Court of 

Colorado is AFFIRMED, and the judgment of the United States 

District Court of Wyoming is REVERSED. 

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