Opinion ID: 615903
Heading Depth: 3
Heading Rank: 3

Heading: Transportation Allowance

Text: Citation argues that it is entitled to a transportation allowance that would eliminate or greatly reduce the amount of additional royalties it owes. As discussed above, Interior’s rules provide for the deduction of transportation costs from the amount upon which royalties are based under certain circumstances. See 30 C.F.R. § 1206.156. Interior’s rules set out a procedure for seeking a transportation allowance and require a lessee to claim “a transportation allowance by reporting it” on a specified form. 30 C.F.R. § 1206.157(a)(1)(i). Citation, however, never filed the appropriate form requesting the allowance. Similarly, Citation failed to assert any entitlement to such an allowance until its appeal to the IBLA. Citation argues that it was nonetheless entitled to a transportation allowance by virtue of its assertions before the IBLA. Citation contends that an audit should aim to correct both underpayments and overpayments and that the denial of a transportation allowance would run contrary to 30 U.S.C. §§ 1721 and 1721a, which permit a party to request a refund during an audit. Interior, on the other hand, maintains that adherence to the procedural requirements for seeking a transportation allowance was required. Interior further asserts that Citation failed to demonstrate its entitlement to a transportation allowance and has noted that it would be forced to search Citation’s records to determine whether any such allowance was proper. As the district court observed, although “MMS must give the transportation allowance when a lessee qualifies,” MMS is not required “to comb a lessee’s records to determine if that lessee is entitled to a transportation allowance.” Citation, 4:08-CV-01977, at 7. Consequently, we cannot say that the IBLA’s decision to hold Citation to the procedural requirements set out in Interior’s rules was arbitrary and capricious or should otherwise be overturned. 8 Case: 10-20729 Document: 00511641536 Page: 9 Date Filed: 10/21/2011 No. 10-20729 Thus, the district court’s grant of summary judgment in favor of Interior regarding the denial of a transportation allowance was proper. D. Interior’s Use and Disclosure of Data from Exxon Citation contends that Interior’s order for additional royalties with regard to two leases in the Big Stick Unit (“BSU”) was arbitrary and capricious because the agency relied on flawed data and methodology. Citation further asserts that Interior acted arbitrarily by failing to disclose sufficient information for Citation to understand, and potentially challenge, the factual and legal basis of Interior’s calculations. See Exxon Co., U.S.A., 113 IBLA 199, 205 (1990) (“The recipient of a decision deserves a reasoned and factual explanation of the rationale for the decision, and must be given some basis for understanding it and accepting it, or, alternatively, for appealing and disputing it.”). Citation has the burden of demonstrating that “the methodology used in the Government’s computation is, in fact, erroneous.” BWAB, Inc., 121 IBLA 188, 195 (1991). “Conclusory allegations of error, standing alone, do not suffice.” United States v. De Fisher, 92 IBLA 226, 227 (1986). During the audit of Citation’s royalty payments, the State Auditor requested documentation from Citation. Citation, however, failed to provide documentation for two leases in the BSU. Because Citation did not provide the requested information, Interior relied on receipts from Exxon, the operator of the unit, for calculations related to these leases. The State Auditor provided summaries showing the calculations, but Citation asserts that Interior was obligated to provide the primary source documents on which the calculations were based. Interior notes that Citation did not request the primary source documents from the State Auditor or Exxon. Further, the IBLA has characterized the methodology used to calculate the royalties due as relatively straightforward and easily discernible from the information provided in the letters from the State 9 Case: 10-20729 Document: 00511641536 Page: 10 Date Filed: 10/21/2011 No. 10-20729 Auditor and the orders that issued on November 2, 2003. In addition, the letters from the State Auditor clearly indicated to Citation that it could provide such documents to change the determination that more royalties were owed. However, as stressed by the district court, “Citation made no effort to supply the actual records or suggest any alternate method of calculation.” Citation, 4:08-CV-01977, at 8–9. We conclude that, because Citation failed to provide records that controvert Interior’s calculation of royalties, the reliance on data from Exxon with respect to the two leases in the BSU was reasonable. Moreover, in light of Citation’s failure to request the primary source documents from the State Auditor or Exxon, as well as the IBLA’s characterization of the relevant calculations as easily discernible and relatively straightforward, we do not find that Interior failed to provide a sufficient explanation of its determination that Citation owed additional royalties under the two BSU leases. Citation further argues that Interior’s determination should be set aside because a subsequent order issued by Interior conflicts with those at issue in this case. Citation relies on an order issued on September 15, 2008, that, according to Citation, used data and methodology that conflict with the data and methodology used by Interior in the calculations in the present dispute. However, the mere fact that an order—one that issued roughly six months after the IBLA issued its final decision—might differ from the orders at issue in the instant case does not demonstrate that Interior acted in an arbitrary manner or even reached an incorrect result in the instant case.3 Moreover, as the district court noted, “none of Citation’s arguments explains why Citation did not simply supply [the] North Dakota [State Auditor] with the proper documentation when the issue first arose.” Citation, 4:08-CV-01977, at 9. In addition, as we 3 Citation itself asserts that the order that issued on September 15, 2008, is incorrect. 10 Case: 10-20729 Document: 00511641536 Page: 11 Date Filed: 10/21/2011 No. 10-20729 discussed above, Citation has not offered its own calculations, provided supplemental documentation, or otherwise shown that Interior arbitrarily reached its determination regarding the royalties owed on the BSU leases. Thus, its argument regarding Interior’s subsequent order is unavailing. E. Interior’s Use of Estimates Finally, Citation asserts that Interior’s use of estimates for the months it did not audit was arbitrary because Interior had access to actual data. Citation asserts that courts have rejected attempts by agencies to rely on estimates in similar situations, but the cases Citation references do not support this position. See Chem. Mfrs. Ass’n v. EPA, 28 F.3d 1259 (D.C. Cir. 1994); Tex Tin Corp. v. EPA, 992 F.2d 353 (D.C. Cir. 1993). Both Tex Tin Corp. and Chemical Manufacturers Ass’n involved situations in which the agency had relied on general information or assumptions in the face of specific evidence to the contrary. Chem. Mfrs. Ass’n, 28 F.3d at 398; Tex Tin Corp., 992 F.2d at 355. As the district court noted, “[t]he IBLA stated, and the record supports the fact, that Citation never proffered any other methodology for calculating the total costs.” Citation, 4:08-CV-01977, at 9–10. We do not find that the IBLA acted arbitrarily by concluding that Citation had not met its burden of showing that Interior’s methodology was flawed. Consequently, we find that the district court’s grant of summary judgment in Interior’s favor was proper.