A three-judge panel of the U.S. 10th Circuit Court of Appeals last week rejected by 2-1 an appeal by Utah producers and several counties to uphold an Obama administration decision nearly four years ago to withdraw 77 oil and natural gas leases that had been sold at the end of the George W. Bush administration.

Companies with high bids on the leases in late 2008, along with the Utah’s Carbon, Uintah and Duchesne counties, appealed the action by then-newly installed Interior Secretary Ken Salazar to withdraw the leases sold by the Bureau of Land Management (BLM) on federal acreage in the eastern corner of the state (see NGI, May 18, 2009). Denver-based Impact Energy Resources LLC, Peak Royalty Holdings Inc. of Utah and Denver-based Questar Exploration and Production Co. (now QEP Resources Inc.) argued that Salazar violated the Mineral Leasing Act and the Federal Land Policy and Management Act by withdrawing the leases after they had been awarded in a December 2008 auction. Salazar’s move came after producers had bought and paid about $6 million for the leases and Interior cashed their checks. The money was later refunded.

In September 2010 U.S. District Court Judge Dee Benson agreed that Salazar had exceeded his authority by withdrawing the leases but he rejected the challenge of the producers and Utah counties because they filed their lawsuit too late (see NGI, Sept. 6, 2010). At the center of the dispute was the date at which Salazar’s decision had been final, with the Interior Department claiming Feb. 4, 2009, and the plaintiffs alleging it was Feb. 12, 2009. Benson disagreed with both sides, concluding that a Feb. 6, 2009 intra-agency memo in which the secretary directed the Utah BLM state director to withdraw the leases was the final decision. The producers were not officially notified until Feb. 12.

Two of the three appellate judges agreed with Benson’s decision that the plaintiffs had waited too long and missed the statutory period to appeal. Senior Judge Stephanie Seymour and Judge Carlos Lucero agreed with the earlier court decision, but Judge Timothy Tymkovich dissented.

“Seymour held that the word ‘final’ bears the same meaning in the phrase ‘final decision of the Secretary [Salazar]’ as it does in the phrase ‘final agency action’ under the Administrative Procedures Act, and that final agency action occurred no later than Feb. 6 [2009],” the 64-page ruling said, noting that Tymkovich agreed with Seymour’s conclusion but disagreed on the majority’s conclusion. Judge Tymkovich agrees with Judge Seymour’s conclusion that final agency action is necessary, but disagrees with the majority’s conclusion that the suit is time-barred as explained in his dissent.”

Tymkovich argued that a Feb. 6, 2009 memo could not have been the final agency action because it “did not withdraw the leases but instead anticipated that further steps would be needed to effectuate the withdrawals,” the court decision said. The decision goes on to cite the majority as agreeing with the district court that the energy operators were “not entitled to equitable tolling in this matter” since the BLM notified the high bidders six days after Salazar made his decision, and the government notified the operators of its position that Feb. 6 was “the operative date during agency proceedings.”

While expressing disappointment with the appeals court decision, a QEP spokesperson said his company was “encouraged” by Tymkovich’s “sharp” dissent because he “concluded that we had made a timely appeal of BLM’s lease withdrawal decision in 2009…While we continue to review the details of the decision, we believe the conflicting rationales offered by all three judges on the core procedural question make this case a potential candidate for retrial by the [entire] 10th Circuit Court of Appeals.” The decision “clearly sets a disturbing legal precedent,” one he described as giving the use of internal communications among government officials the same standing as public notice.

The decision articulated some future problems in upholding the BLM handling of the leases, noting that giving “legal effect to internal agency documents will likely expose agencies to judicial challenges that would today be considered unripe,” and it raises the potential “for agencies intentionally abusing [generic appellate court decisions] by keeping ‘final decisions’ secret for some time, or by failing to disclose the precise dates such decisions were made internally.” The appeals court acknowledged that “the notion that undisclosed, even secret, documents trigger a statute of limitations is contrary to the notion of open and accountable administrative decision-making.”

©Copyright 2012Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.