Marathon Oil Co. v. State, Department of Natural Resources
254 P.3d 1078
Alaska2011Background
- Marathon Oil produced gas under state leases on the Ninilchik unit beginning in 2003.
- Royalties are 12.5% of value; value is normally determined by the higher of four price benchmarks.
- Contract pricing (using lessee’s contract price with utilities) is available by application under AS 38.05.180(aa).
- DNR historically approved contract pricing only for future production, not retroactively, and denied Marathon’s retroactive request for 2003–2008.
- Marathon sought retroactive contract pricing for 2003–2008 and for 2008 onward; DNR approved only for 2008 onward.
- Superior Court affirmed DNR’s decision; Marathon appealed to the Alaska Supreme Court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AS 38.05.180(aa) permits retroactive contract pricing. | Marathon argues the statute allows retroactive application. | DNR maintains retroactivity is prohibited by the statute’s text and purpose. | Statute is ambiguous; DNR's long-standing interpretation forbidding retroactivity is reasonable. |
| Whether DNR needed to promulgate its interpretation as a regulation. | Marathon contends the interpretation must be in regulation before application. | DNR's interpretation is an internal agency procedure, not a regulation. | DNR was not required to promulgate the interpretation as a regulation. |
| Whether due process was violated by DNR’s handling of Marathon’s request. | Marathon claims inadequate notice of DNR’s interpretation. | Marathon had notice and opportunity to present its case; due process not violated. | Marathon’s due process rights were not violated. |
| What is the proper scope and meaning of “prospective” in AS 38.05.180(aa)(2)? | Marathon argues broader interpretation allows past-period contract pricing. | Court should defer to DNR’s interpretation that “prospective” covers future production only. | Phrase ambiguous; court defers to longstanding DNR interpretation. |
Key Cases Cited
- Alyeska Pipeline Service Co. v. State, 145 P.3d 561 (Alaska 2006) (agency interpretations in adjudication are permissible; not every issue requires rulemaking)
- Amerada Hess Pipeline Corp. v. Alaska Pub. Utils. Comm'n, 711 P.2d 1170 (Alaska 1986) (agency adjudication endowed with policy considerations in regulation)
- Bartley v. State, Dep't of Admin., Teacher's Ret. Bd., 110 P.3d 1254 (Alaska 2005) (longstanding agency interpretations deserve deference)
- Bullock v. State, 19 P.3d 1209 (Alaska 2001) (longstanding, continuous agency interpretation entitled to deference)
- Premera v. State, 171 P.3d 1110 (Alaska 2007) (prefer deferential review for longstanding agency views)
- Alyeska Pipeline Service Co. v. State, 145 P.3d 561 (Alaska 2006), 145 P.3d 561 (Alaska 2006) (context of regulatory interpretations in statutory scheme)
- Earth Res. Co. v. State, Dep't of Revenue, 665 P.2d 960 (Alaska 1983) (consideration of agency expertise in statutory interpretation)
- Chevron U.S.A. v. LeResche, 663 P.2d 923 (Alaska 1983) (statutory purpose and framework inform interpretation)
- Bullock v. State, 19 P.3d 1209 (Alaska 2001) (see above)
- Wilson v. State, Dep't of Corr., 127 P.3d 826 (Alaska 2006) (agency action as regulate via adjudication and interpretation)