334 F. Supp. 3d 174
D.C. Cir.2018Background
- BLM issued oil and gas Lease M-53323 in 1982 (Badger-Two Medicine area) after a 1981 Environmental Assessment and decision allowing conditional surface occupancy; a 1985 EA approved an APD for an exploratory well and incorporated the 1981 EA.
- The lease was repeatedly suspended beginning in 1993 and remained under suspension for over 30 years; Solenex sued in 2013 alleging unreasonable agency delay under the APA, and the court previously granted partial summary judgment finding the delay unreasonable.
- After the court ordered an accelerated schedule, the Government in 2015–2016 initiated and finalized administrative cancellation of the lease, asserting the lease and APD were improperly issued due to pre-lease NEPA and NHPA violations.
- Solenex challenged the cancellation under the APA, arguing (inter alia) lack of authority to cancel, arbitrary and capricious action given decades of reliance, laches/statute of limitations, and estoppel; it sought vacatur of the cancellation and reinstatement of the lease.
- The Court concluded that, even assuming the Secretary had authority to cancel for pre-lease errors, the Government’s cancellation after more than three decades without adequate consideration of reliance interests and without notice was arbitrary and capricious, and ordered reinstatement of the lease.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Secretary's authority to administratively cancel leases for pre-lease errors | MLA does not authorize unlimited post-issuance administrative cancellation decades later | Secretary has inherent authority (Boesche) to correct administrative errors and cancel leases | Court declined to resolve scope of authority; decision turned on arbitrariness given facts rather than on absolute cancellation power |
| APA arbitrary-and-capricious standard given 30+ year delay | Cancellation after decades of suspension and after approvals ignored lessee reliance and was unreasonable | Timing does not bar reconsideration; agency may correct prior errors regardless of lapse | Cancellation was arbitrary and capricious because agency failed to consider reliance and acted after an unreasonable delay without adequate explanation |
| Role of NEPA and NHPA in justifying cancellation | If defects existed at issuance, cancellation might be improper due to reliance; plaintiffs also argued procedures were satisfied decades ago | Agency relied on asserted pre-lease NEPA/NHPA violations to deem leases improperly issued and cancel administratively | Court did not decide whether initial NEPA/NHPA compliance was defective; held that even if defects existed, the agency’s late rescission violated the APA |
| Remedy requested (vacatur and reinstatement) | Lease cancellation should be vacated and lease reinstated | Deference to agency cancellation and remedial authority | Court granted Solenex summary judgment, denied Government’s cross-motion, and remanded with order to reinstate lease |
Key Cases Cited
- Boesche v. Udall, 373 U.S. 472 (Sup. Ct.) (agency cancellation of defective lease upheld in specific circumstances)
- Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (Sup. Ct.) (arbitrary-and-capricious review standard)
- Robertson v. Methow Valley Citizens Council, 490 U.S. 332 (Sup. Ct.) (NEPA requires a "hard look" but is procedural)
- Encino Motorcars, LLC v. Navarro, 136 S. Ct. 2117 (Sup. Ct.) (unexplained inconsistency can render agency action arbitrary)
- American Wild Horse Preservation Campaign v. Perdue, 873 F.3d 914 (D.C. Cir.) (agency reversal after decades requires reasoned explanation)
- Texas Oil & Gas Corp. v. Watt, 683 F.2d 427 (D.C. Cir.) (retroactive rescission of agency action criticized for harming reliance)
- United States v. Winstar Corp., 518 U.S. 839 (Sup. Ct.) (government obligations and reliance interest principles)
- Mobil Oil Expl. & Producing Se., Inc. v. United States, 530 U.S. 604 (Sup. Ct.) (leases under the MLA governed by contract principles)
- Duncan's Point Lot Owners Ass'n, Inc. v. F.E.R.C., 522 F.3d 371 (D.C. Cir.) (NHPA consultation adequacy principles)
- Sierra Club v. F.E.R.C., 867 F.3d 1357 (D.C. Cir.) (NEPA is primarily procedural and "information-forcing")