Court Opinion

ID: 8921268
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:18:57.930875+00
Date Added: 2024-06-11T17:09:18.428422
License: Public Domain

JOHN R. GIBSON, Circuit Judge,
dissenting.
The court’s opinion today has much appeal. It affirms the necessity for competitive bidding for the oil leases in question and will result in substantial income for Arkansas schools. See 30 U.S.C. §§ 191, 355. The court, however, paints with too broad a brush, substantially exceeding our proper narrow scope of review, and I must respectfully dissent.
I find it hard to conclude that the district court did anything other than conduct a de novo hearing and substitute its judgment for that of the Secretary. The hearing extended over four days; ten witnesses testified in person and three by deposition. The hearing transcript totaled 837 pages and the deposition testimony totaled 338 pages. The district court in its order made some eighty findings of fact dealing with the geologic issues. See Arkla Exploration Co. v. Watt, 562 F.Supp. 1214, 1218-24 (W.D.Ark.1983) (Findings of Fact 37-113, 119-22). There was testimony and findings of expert opinions contesting the method upon which Johnson clearlisted the leases as being non-KGS.
While the district court finds that there was no rational basis underlying the appli*362cation of the one-mile rule, its findings of fact ignored the testimony showing that such a rational basis existed. Johnson testified that production in the area was trapped by stratigraphic lenses. Johnson deposition at 20. The area was characterized by usually very small but numerous gas traps. Id. at 180-81, 191. Such a geological structure explains the usage of the one-section measure, which is consistent with that adopted by the State of Arkansas. The witness Horton further explained that Johnson’s knowledge of the small size of the traps in the area formed the basis for stepping out KGS’s on sections in the area. Tr. at 682-84, 745, 746.
The testimony was clear that Johnson had long experience and detailed geological knowledge of the area in question. The court overlooks testimony that this knowledge was utilized in making the conclusion that the one-mile stepout in this particular area was desirable. Nor does the record reflect that Johnson’s policy of stepping out one section was totally automatic. If the well was not a good one or had a thin sand, it might be included in the adjacent section. Johnson deposition at 62. If the well had a particular kind of sand or was expected to have high production, it could be expanded to take in all adjacent sections. It would be a judgment call. Id. at 195-96.
While the court dismisses the Girard report as damning the determination with faint praise, the report gives further support for the determination. In his letter that accompanied the report from the USGS Director, the Secretary stated “[i]t is my conclusion that the KGS determinations are appropriate, given our understanding of the geology and the legal definitions that have been operative in making such determinations.” D.R. at 392. The report itself states:
[T]he geological evidence does not indicate that the oil and gas producing zones in Fort Chaffee are primarily structurally controlled, rather the evidence supports the view that oil and gas production is predominantly stratigraphically controlled and that individual reservoirs do not have broad areal extent.
Id. at 393. It further concludes that “[e]xcept as noted above, none of the spacing units (sections) can be tied to a producing well. Therefore, the negative KGS determination was properly made.” Id. at 416.
All of the foregoing testimony demonstrates that there was a rational basis for the use of the one-mile stepout from each of the posted wells. With such a rational basis, this court should not conclude that the determination was arbitrary and capricious.
The court bases its decision on the failure of the Johnson method to meet the statutory requirement, looking essentially to the legislative history. This history demonstrated, however, that when Congress was considering this statute in 1918 the question was whether an arbitrary distance measure of ten or twenty or fifty miles should be used, or the more general geological description. To say that the rejection by Congress of the ten-mile or longer distance measures makes the present determination contrary to this statute is again to overlook the geological testimony of the small gas traps in this particular area that made the use of the one-mile stepout particularly appropriate.
The opinion of the court today should be compared with First National Bank of Fayetteville v. Smith, 508 F.2d 1371 (8th Cir.1974). There we recognized that more than mere error is necessary to meet the test and that administrative action may be regarded as arbitrary and capricious only where it is not supportable on any rational basis. Id. at 1376. Further, evidentiary conflicts should be weighed in favor of the administrative action. Id. at 1378. In First National Bank the district court independently weighed the evidence and decided to give greater weight to the testimony of the protestant’s expert and focused exclusively on the testimony most favorable to that view rather than the evidence that would support the finding of the agency. The opinion of the court today in affirming the district court takes the same approach as that taken by the district court and properly reversed in First National Bank.
*363A further word is appropriate. The statute does no more than require a determination of known geological structures. The district court in its order, which the court today affirms, establishes a lengthy and detailed procedure of items to be considered in making this determination. See Arkla Exploration Co. v. Watt, 562 F.Supp. at 1227. To approve these requirements means that the court is imposing substantial restrictions on the work of the Secretary. The record indicates that some 17,000 to 18,000 leases per year are submitted for approval. To require the consideration of the factors required by the district court would bring to a standstill any meaningful activity in this area.
While the court may feel that a poor job was done in the processing of these leases and that Johnson could have been more thorough, our task is simply to determine whether the actions of the Secretary, acting through Johnson, were arbitrary or capricious. If there is a rational basis for the actions, we do not set them aside. The rational basis exists. I would reverse the judgment of the district court.