Court Opinion

ID: 157724
Source: CourtListenerOpinion
Date Created: 2010-08-14 05:05:35+00
Date Added: 2024-06-11T13:26:11.764373
License: Public Domain

F I L E D
                                                                 United States Court of Appeals
                                                                         Tenth Circuit
                                    PUBLISH
                                                                        MAR 25 1999
                   UNITED STATES COURT OF APPEALS
                                                                     PATRICK FISHER
                                                                             Clerk
                                TENTH CIRCUIT

 AMERADA HESS CORPORATION,

       Plaintiff - Appellant,
 v.                                                    No. 97-5223

 DEPARTMENT OF INTERIOR,

       Defendant - Appellee.

                 Appeal from the United States District Court
                   for the Northern District of Oklahoma
                          (D.C. No. 94-CV-1051-H)

Jerry E. Rothrock of Akin, Gump, Strauss, Hauer & Feld, L.L.P., Washington,
D.C. (Patrick D. O’Connor of Moyers, Martin, Santee, Imel & Tetrick, Tulsa
Oklahoma and David M. Castro, Amerada Hess Corporation, Houston, Texas with
him on the briefs) for the Plaintiff - Appellant.

Robert L. Klarquist, Department of Justice, Washington, D.C. (Lois J. Schiffer,
Assistant Attorney General, Stephen Lewis, United States Attorney, and Phil
Pinnell, Assistant United States Attorney, Tulsa, Oklahoma; David C. Shilton,
Department of Justice, Washington, D.C.; and Geoffrey Heath, Office of the
Solicitor, Department of Interior, Washington, D.C., with him on the briefs) for
the Defendant - Appellee.

Before TACHA, McWILLIAMS and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.
      In this case, we are asked primarily to determine whether reimbursements

for certain production-related costs, received by a federal gas lessee from its gas

purchasers under an administrative order of the Federal Energy Regulatory

Commission (“FERC”), are properly subjected to federal royalties by the

Secretary of the Interior (“Secretary”) under the authority of the Outer

Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. §§ 1331-1356. We are also

required to resolve whether the Secretary’s claims may be offset by the lessee’s

own claims for reimbursement from the Secretary. Finally, we must determine

whether either set of claims is barred under the applicable statute of limitations.

Exercising jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s

holding that the Department of the Interior (“DOI”) is entitled to royalties on cost

reimbursements received by Amerada Hess Corporation (“AHC”). Finding lack

of jurisdiction, we vacate the district court’s rulings on AHC’s claims for

offsetting royalty overpayments against the royalties owed DOI.

                                          I

      The case grows out of two separate administrative proceedings before DOI.

The first, finalized in an agency decision of December 13, 1993, determined that

AHC, a lessee of continental shelf oil and gas deposits owned by the United

States, was time-barred from claiming reimbursement from the Secretary for a

royalty over-payment of $683,333. Under OCSLA, which authorizes the

                                         -2-
Secretary to lease continental shelf oil and gas reserves, 43 U.S.C. § 1337, the

Secretary is entitled to royalties on the “amount or value of the production saved,

removed, or sold” by a lessee, id. at § 1337(a)(1)(A). If the Secretary determines

that a lessee has paid excessive royalties, the lessee is entitled to reimbursement

without interest “if a request for repayment of such excess is filed with the

Secretary within two years after the making of the payment.” Id. at § 1339(a). In

this case, AHC applied for reimbursement nearly six years after the alleged over-

payment was made. The Secretary denied the request, citing the two year statute

of limitations.

      A second administrative determination, dated December 1, 1995, requires

AHC to pay DOI $1,022,669.52 in additional royalties on some sixteen offshore

leases. The DOI based this determination on a series of administrative orders that

FERC issued under the price-setting authority of the Natural Gas Policy Act of

1978, 15 U.S.C. § 3320(a)(2). 1 FERC regulations stipulate that sale prices may

      1
        Section 3320(a)(2) has since been repealed. See Pub. L. 101-60, § 2(b) 103 Stat.
158 (July 26, 1989). At all times relevant to this appeal, however, it provided that:

      a price for the first sale of natural gas shall not be considered to exceed the
      maximum lawful price . . . if such sale price exceeds the maximum lawful
      price to the extent necessary to recover . . . any costs of compressing,
      gathering, processing, treating, liquefying, or transporting such natural gas,
      or other similar costs, borne by the seller and allowed for, by rule or order,
      by [FERC].

15 U.S.C. § 3320(a)(2).

                                            -3-
always include “production-related” costs, defined as “costs, other than

production costs, that are incurred . . . to deliver, compress, treat, liquefy, or

condition natural gas.” 18 C.F.R. §§ 271.1104(a) & 271.1104(c)(7)(i). To

implement these regulations, FERC issued a number of administrative orders

establishing generic cost allowances for gathering and compression costs. See

Order 94-A, 48 Fed. Reg. 5152, 5180 (Feb. 3, 1983). The Fifth Circuit upheld

these orders, see Texas Eastern Transmission Corp. v. FERC, 769 F.2d 1053 (5th

Cir. 1985), thereby allowing numerous gas producers, including AHC, to receive

large lump-sum reimbursements from their purchasers. It is these so-called

“Order 94 reimbursements” that DOI found royalty-bearing under OCSLA, 43

U.S.C. § 1337(a)(1)(A).

       AHC claims this latter determination is arbitrary and capricious,

unsupported by substantial evidence, and in excess of statutory authority. The

company also insists 28 U.S.C. § 2415(a) bars DOI’s claim for royalty payments

on the Order 94 reimbursements. 2 Finally, AHC contends that it is entitled to

offset its obligations to DOI against royalty over-payments on other leases

(“cross-lease netting”). In its December 1, 1995, decision, DOI rejected all these

       2
         “Every action for money damages brought by the United States . . . which is
founded upon any contract . . . shall be barred unless the complaint is filed within six
years after the right of action accrues or within one year after final decisions have been
rendered in applicable administrative proceedings required by contract or by law,
whichever is later . . . .” 28 U.S.C. § 2415(a).

                                            -4-
claims. The district court affirmed DOI and granted summary judgment against

AHC on all its claims, and the company appeals.

                                          II

                                          A

      AHC’s amended complaint, filed in the district court, asserts jurisdiction

under OCSLA’s citizen suit provisions, see 43 U.S.C. § 1349(a), as well as under

the Administrative Procedure Act (“APA”), see 5 U.S.C. § 704. Section

1349(a)(1) states that:

      any person having a valid legal interest which is or may be adversely
      affected may commence a civil action on his own behalf to compel
      compliance with this subchapter against any person, including the
      United States, and any other government instrumentality or agency
      (to the extent permitted by the eleventh amendment to the
      Constitution) for any alleged violation of any provision of this
      subchapter or any regulation promulgated under this subchapter, or of
      the terms of any permit or lease issued by the Secretary under this
      subchapter.

43 U.S.C. § 1349(a)(1). 3 The government counters, first, that this citizen suit

provision cannot support an action challenging a decision of the Secretary

rendered in fulfillment of his duties under the Act, and second, that even were

jurisdiction to lie under 43 U.S.C. § 1349(a), judicial review should nonetheless

proceed in accordance with APA standards and procedures.

      3
       OCSLA defines “person” to include “a private, public, or municipal corporation.”
43 U.S.C. § 1331(d).

                                         -5-
       We agree with the government’s contention that this suit cannot be brought

under 43 U.S.C. § 1349(a)(1). In closely analogous circumstances, the Fifth

Circuit has refused to exercise jurisdiction under this provision. See OXY USA,

Inc., v. Babbitt, 122 F.3d 251, 258 (5th Cir. 1997). OXY holds that the citizen

suit provision is not available to challenge agency decisions that “were or will be

otherwise subject to judicial review under the APA.” Id. Any other interpretation

of the citizen suit provision would implicitly repeal the APA with respect to such

agency decisions—contrary to the well-established canon of statutory construction

against repeals by implication. See id. (citing Watt v. Alaska, 451 U.S. 259, 267

(1981); 1A Norman J. Singer, Sutherland on Statutes and Statutory Construction §

23.09, at 338 (5th ed. 1993)). In addition, the Supreme Court has recently refused

to construe the Endangered Species Act’s citizen suit provision, 16 U.S.C. §

1540(g)(1)(A), as an “alternative avenue for judicial review of the Secretary’s

implementation of the statute” because such an interpretation “would effect a

wholesale abrogation of the APA’s ‘final agency action’ requirement.” Bennett

v. Spear, 117 S. Ct. 1154, 1166-67 (1997). 4 Although there is no dispute that

“final agency action” has occurred in this case, appellant’s construal of 43 U.S.C.

       4
        Like 43 U.S.C. § 1349(a)(1), the Endangered Species Act’s citizen suit provision
allows for the commencement of a civil suit to enjoin any person, “including the United
States and any other governmental instrumentality or agency . . . who is alleged to be in
violation of any provision of this chapter or regulation issued under the authority thereof.”
16 U.S.C. § 1540(g)(1)(A).

                                            -6-
§ 1349(a)(1) would abrogate the APA in precisely such fashion. Like the

Supreme Court and the Fifth Circuit, we refuse to adopt such an implausible

interpretation. Consequently, we conform our review to APA standards and the

available administrative record.

                                        B

      Furthermore, we are without jurisdiction to consider appellant’s claims that

the Secretary has erroneously refused to repay or refund AHC’s various royalty

overpayments. Under the Tucker Act, 28 U.S.C. § 1491, an action against the

United States, for monetary relief in excess of $10,000, and founded upon the

Constitution, federal statute, executive regulation, or government contract, must

be brought in the Court of Federal Claims. See 28 U.S.C. § 1491(a)(1). AHC’s

claims for repayments proceed from at least one of these enumerated sources of

law, and are intended to obtain more than the minimum amount of monetary relief

required for Court of Claims jurisdiction under the Tucker Act. Exclusive

jurisdiction over these claims thus lies in the Court of Claims. See Diamond

Shamrock Exploration Co. v. Hodel, 853 F.2d 1159, 1168 (5th Cir. 1988) (finding

exclusive jurisdiction of Court of Claims to hear refund request from oil and gas

producer-lessee that had paid royalties to DOI under OCSLA); see also National

Ass’n. of Counties v. Baker, 842 F.2d 369, 376 & n. 5 (D.C. Cir. 1988)

(characterizing 43 U.S.C. § 1339(a) as “compensation mandating” and therefore

                                       -7-
within the exclusive jurisdiction of the Court of Claims when other provisions of

the Tucker Act have been met).

       Both parties argue that the Court of Claims does not have exclusive

jurisdiction over AHC’s refund claims because AHC seeks declaratory judgments

concerning its rights to refunds under OCLSA. Accordingly, the parties contend

the district court had jurisdiction to hear all of AHC’s claims under the APA,

which provides concurrent jurisdiction to “court[s] of the United States” where an

action seeks “relief other than money damages.” 5 U.S.C. § 702. This argument,

which asks us to place the form of a complaint over the substance of its claims, is

unavailing. 5 “[I]f the plaintiff’s ‘prime objective’ or ‘essential purpose’ is to

recover money (in an amount in excess of $10,000) from the federal government,

then the Court of Federal Claims’ exclusive jurisdiction is triggered.” Burkins v.

       5
         It is irrelevant that AHC presents its prayer for relief in equitable language,
because § 702 distinguishes between “specific relief and substitute relief, not between
equitable and nonequitable categories of remedies.” Department of Army v. Blue Fox,
Inc., 119 S. Ct. 687, 691 (1999). In distinguishing between these two types of remedies,
the Court has explained that “[d]amages are given to the plaintiff to substitute for a
suffered loss, whereas specific remedies ‘are not substitute remedies at all, but attempt to
give the plaintiff the very thing to which he is entitled.’” Bowen v. Massachusetts, 487
U.S. 879, 895 (1988) (quoting Maryland Dep’t. of Human Resources v. Dep’t. of Health
and Human Services, 763 F.2d 1441, 1446 (D.C. Cir. 1985)). AHC’s claims might
appear to be for specific relief, insofar as AHC requests a monetary award representing
royalty overpayments that the government has refused to refund. Traditionally, however,
“a suit seeking to recover a past due sum of money that does no more than compensate a
plaintiff’s loss is a suit for damages, not specific relief.” Bowen, 487 U.S. at 918 (Scalia,
J., dissenting).

                                            -8-
United States, 112 F.3d 444, 449 (10th Cir. 1997) (citations omitted); see also

Amoco Production Co. v. Hodel, 815 F.2d 352, 361 (5th Cir. 1987) (citation

omitted) (declining to exercise jurisdiction over OCSLA claim, and stating that

“in the ‘murky’ area of Tucker Act jurisprudence, one of the few established

principles is that the substance of the pleadings must prevail over their form”).

Therefore, this court does not—and the district court did not—have jurisdiction

over AHC’s claims arising from DOI’s refusal to refund AHC’s excess royalty

payments. 6

                                            III

       As to appellant’s claim that 28 U.S.C. § 2415(a) bars DOI’s claim for

additional royalties, the government asserts that this provision does not apply to a

claim for unpaid royalties owed the government under the terms of a lease. We

do not decide the merits of this assertion, however, because, even were we to

assume that § 2415(a) did apply, it would not bar the claims made by the

Secretary.

       Section 2415(a) allows the government to bring an “action for money

damages” so long as “the complaint is filed within six years after the right of

       6
        AHC raises 28 U.S.C. § 2406 to support the merits of its claim for offsets.
Implicit in AHC’s reliance on this statute is an argument that the government has waived
sovereign immunity for AHC’s claims for credits. Section 2406, however, waives
sovereign immunity for such claims only in “an action by the United States,” and not, as
here, where the person seeking credit against the government files suit in district court.

                                           -9-
action accrues or within one year after final decisions have been rendered in

applicable administrative proceedings.” 28 U.S.C. § 2415(a). On July 1, 1986,

DOI first ordered AHC to pay royalties on its Order 94 reimbursements. This

order was issued within six years of the July 25, 1980, start date of AHC’s

production of natural gas from oil and gas leases covering submerged lands under

OCSLA. According to AHC, royalties on gas sold were due no later than the end

of the month following production. Consequently, DOI made its demands for

royalty payment on the Order 94 reimbursements within six years of the earliest

possible date of accrual.

      Appellant counters that DOI did not file a counterclaim in district court

until January 6, 1995, well beyond the applicable six-year period. This assumes

that the July 1, 1986, order is not itself a “complaint” in “an action for money

damages” within the meaning of § 2415(a). If that assumption is correct,

however, then § 2415(a) cannot apply in this case at all because, under the plain

terms of appellant’s reading of the statute, § 2415(a) only applies to bar actions

based on the filing of a formal complaint. Section 2415(a), therefore, simply will

not apply to the July 1, 1986, order. Yet that order is the entire basis for the

government’s action in this case; all that has happened since DOI issued the order

are AHC’s administrative and judicial appeals of that decision.

                                         - 10 -
      It is the district court’s refusal to find the order violative of the APA, rather

than its adjudication of the merits of any complaint for money damages filed by

the government, that leaves appellant owing the ordered royalties to the

government. If the order is not tantamount to a complaint for money damages,

then the government did not need to file a complaint until the final administrative

action to establish appellant’s obligation. Here, the government filed its

counterclaim before the final agency action on December 1, 1995. Consequently,

operation of the limitations period in § 2415(a) cannot undermine the

determination that appellant owes unpaid royalties on the Order 94

reimbursements.

                                          IV

      Finally, we address appellant’s substantive complaint that the Secretary’s

demand for royalties on Order 94 reimbursements is arbitrary and capricious, not

supported by substantial evidence, and is otherwise not in accordance with law.

As a preliminary matter, we adopt the Fifth Circuit’s holding, based on DOI’s

longstanding interpretation of its own regulations, that Order 94 reimbursements

are royalty bearing. See Mesa Operating Limited Partnership v. U.S. Dep’t of the

Interior, 931 F.2d 318, 323-26 (5th Cir. 1991).

      In response to the Secretary’s order for royalties, AHC originally argued

that its Order 94 reimbursements were for post-production delivery services that

                                         - 11 -
were appropriately excluded from the royalty base under the agency’s own

regulations. DOI’s Board of Land Appeals (“IBLA”) rejected this claim in a

ruling issued August 3, 1993. See Appellant’s App. at 553. In that same

decision, however, IBLA remanded for a determination of whether AHC could

substantiate its claim that certain Order 94 reimbursements were for

transportation purposes and hence not royalty-bearing. See id. at 555. The

December 1, 1995, decision by the Secretary, which serves as the final agency

action in this case, determined that the company had failed to prove that any of

the Order 94 reimbursements were exempt from royalties on this basis. See

Appellant’s App. at 994, 998-1012.

      AHC offers three arguments against the agency’s conclusion. First, AHC

argues that the agency depends on a reading of the “marketable condition” rule

that DOI itself rejected in Xeno, Inc., 134 IBLA 172 (1995). During the period in

dispute, the marketable condition rule required lessees to “put into marketable

condition, if commercially feasible, all products produced from the leased land.

In calculating the royalty payment, the lessee may not deduct the costs of

treatment.” 30 C.F.R. § 250.42. 7 A related regulation promulgated during this

period, the “gross proceeds rule,” provided that “[u]nder no circumstances shall

      7
       The marketable condition rule has remained in effect after 1988 in 30 C.F.R.
§§ 206.152(i) and 206.153(i).

                                         - 12 -
the value of production be less than the gross proceeds accruing to the lessee.”

30 C.F.R. § 206.150. 8 In Xeno, DOI found that the producer company’s gas was

marketable directly at the wellhead. Therefore, all subsequent gathering costs

were post-production and non-royalty-bearing, and were not part of the value of

production and fell outside the terms of the marketable condition and gross

proceeds rules. See Xeno, 134 IBLA at 183-84. AHC argues that its Order 94

reimbursements, like those received by Xeno, are not subject to royalty payments.

We agree with the district court, however, that Xeno reached a different result

because the producer company in that case showed that its gas was in marketable

condition and could be sold directly from the wellhead. AHC has made no such

showing here, and therefore cannot benefit from DOI’s ruling in Xeno.

      Second, AHC argues that it is entitled to offsets for the cost of transporting

the gas from the wellheads. AHC never proved that its Order 94 reimbursements

were for transportation. It simply argued that all of its gas movement costs were

transportation costs rather than gathering costs covered by the marketable

condition or gross proceeds rules. Because AHC did not meet its burden at the

administrative level, we cannot say that DOI’s ruling was arbitrary or capricious.

      8
       The gross proceeds requirement has remained in effect after 1988 as 30 C.F.R.
§§ 206.152(h) and 206.153(h).

                                         - 13 -
      Third, AHC claims that a similarly situated lessee, Marathon, has been

granted a transportation allowance for its Order 94 reimbursements that exempt it

from paying royalties for the same services that AHC performed and for which

AHC was denied allowance. AHC’s comparison to DOI’s compromise and

settlement with Marathon is not relevant here because Marathon was allowed its

transportation deductions pursuant to a settlement rather than to DOI’s

interpretation of its regulations. Accordingly, we hold that DOI properly

determined that AHC is obligated to pay royalties on the Order 94 reimbursements

under its well-established regulations.

                                           V

      Because the district court did not have jurisdiction to hear AHC’s claims

for excess royalty payment, we VACATE that part of its judgment; in all other

matters, we AFFIRM the district court.

                                          - 14 -