ORDER GRANTING PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT
Re: Dkt. No. 13
In this case, Plaintiffs People of the State of California, ex rel. Xavier Becerra, Attorney General, and People of the State of New Mexico, ex rel. Hector Balderas, Attorney General, seek a declaration that that the action of Defendants United States Department of the Interior (“DOI”), Office of Natural Resources Revenue (“ONRR”), Secretary of the Interior Ryan Zinke, and Director of the ONRR Gregory Gould violated the Administrative Procedure Act (“APA”) and an injunction requiring Defendants to vacate- the postponement of and reinstate the Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation rule at 81 Fed. Reg. 43,338 (July 1,- 2016) (the “Rule”). On June 2, 2017, Plaintiffs moved for summary judgment. Dkt. No. 13. Defendants opposed on July 20, :2017, and Plaintiffs replied on August 4, 2017. Dkt. Nos. 26 & 27. On August 22, 2017, the Gourt heard argument on Plaintiffs’ motion. For the reasons stated below, the Court GRANTS Plaintiffs’ motion for summary judgment.
I. FACTUAL BACKGROUND
In 2007, ONRR’s Subcommittee on Royalty Management issued a report with several recommendations regarding mineral revenue collection from Federal and Indian lands. ■ Dkt. No. 15-9, Ex. 9, 90 Fed. Reg. 608. ONRR engaged in a rulemaking process and issued two advanced notices of proposed rulemaking in May 2011. Dkt. No. 15-7, 76 Fed. Reg. 30,878; Dkt. No. 15-8, 76 Fed. Reg. 30,881.' One advanced notice requested comments and' suggestions before proposing changes to the regulations governing the valuation of oil and gas produced from Federal leases for royalty calculation. Dkt. No. 15-7, 76 Fed. Reg. 30,878. The other requested comments and suggestions before proposing changes to the regulations governing the valuation of coal produced from Federal and Indian leases, also used to calculate royalties. Dkt. No. 15-8, 76 Fed. Reg. 30,-881. After receiving respоnses to the call for comments- and conducting six public workshops, ONRR issued a proposed rule entitled “Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform” (the “Proposed Rule”) on January 6, 2015. Dkt. No. 15-9, Ex. 9, 90 Fed. Reg.
(1) to offer greater simplicity, certainty, clarity, and consistency in product valuation for mineral lessees and mineral revenue recipients; .(2) to ensure that Indian mineral lessors receive the maximum revenues from coal resources on their land, consistent with the Secretary’s trust responsibility and lease terms; (3) to decrease industry’s cost of compliance and ONRR’s cost to ensure industry compliance; and (4) to provide early certainty to. industry and to ONRR that companies have paid every dollar due.
Id. ONRR estimated that the Rule would increase royalty collections by between $71.9 million and $84.9 million. Id. at 43,-359.
On December 29, 2016, various coal and oil,industry groups challenged the Rule in three lawsuits filed in the United States District Court for the District of Wyoming, contending that the Rule was arbitrary and capricious. Dkt. No. 13-1, Mot. at 5. The Rule took effect on Japuary 1, 2017, although first reports and royalty payments under the Rule were not due until February 28, 2017. Dkt. No, 26-1, Gould Decl. ¶ 4.,
Between October 17, 2016 and December 15, 2016, ONRR conducted eleven training sessions on the Rule. Id. ¶ 4. According to- Gould, the trainings revealed some confusion about the Rule. Id. During this trаining, ONRR received requests for guidance about how to comply with the Rule. Id. ¶5. ONRR responded that it could not provide guidance before the January 1, 2017 effective date and could not guarantee guidance by the end of February. Id.
On February 17, 2017, the plaintiffs in the District of Wyoming suits sent a letter to ONRR' which “ask[ed] ONRR to postpone the implementation of the Rule under 30 U.S.C. § 705 of the Administrative Procedure Act.” Id. ¶ 6. On February 22, 2017, Deputy Director of ONRR James D. Steward issued a letter stating-that “[i]n light of the pending litigation, ONRR has decided to postpone the effective date of the 2017 Valuation.Rule-until the litigation is resolved pursuant to Section 705 of the Administrative Procedure Act.” Dkt. No. 15-2, Ex. 2 at 1. The letter stated that the effective date of the Rule was January 1, 2017, with the first reports due on February 28, 2017. Id. According to the letter, those affected by the Rule “should continue tо value, report, and pay royalties under the rules that were in effect prior to January 1, 2017,” i.e., under the old regulation that the Rule replaced. Id. ONRR also published an announcement on its website stating, “Attention: The 2017 Valuation Rule has- been stayed!” -Dkt. No. 26-1, Gould Deck, Ex. 4.
On February 27, 2017, ONRR issued a notice in the- Federal Register which postponed the Rule. Dkt. No. 15-12, Ex. 12, 82 Fed. Reg. 11,823. Referring to three separate petitions challenging the Rule in the District of Wyoming, ONRR wrote that “[i]n light of the- existence and potential consequences of the pending litigation, ONRR has concluded that justice requires it to postpone the effectiveness of the 2017 Valuation .Rule pursuant to 5 U.S.C. § 705 of the Administrative Procedure Act, pending judicial review.” Id.'
On .March 23, 2017, ONRR moved to stay the three cases in the District of Wyoming because they were developing a notice of proposed rulemaking to repeal
II. PROCEDURAL HISTORY
On April 26, 2017, Plaintiffs filed a complaint seeking declaratory and injunctive relief. Dkt. No. 1. Plaintiffs alleged that Defendants’ actions violated 5 U.S.C. sections 553, 705, and 706, and sought a declaratory judgment that Defendants acted arbitrarily, capriciously, contrary to law, abused their discretion, and failed to follow the required procedure in their delay of the Rule. Id. ¶¶ 36-45; p. 9. Plaintiffs аlso requested that the Court vacate Defendants! postponement of the Rule, enjoin Defendants to reinstate the Rule, award Plaintiffs their costs, expenses, arid reasonable attorneys’ fees, and award such other relief as the Court deems just and proper. Id. at 9-10.
On June 2, 2017, Plaintiffs moved for summary judgment. Dkt. No. 13. Plaintiffs argued that ONRR’s postponement of the Rule violated the APA in two respects. First, Plaintiffs argued that ONRR incorrectly invoked Section 705 of the APA to postpone, the effectiveness of the Rule after it had already gone into effect, contrary to the plain language of the .statute. Second, Plaintiffs contended that ONRR effectively repealed the Rule without soliciting input from the public as required by the APA’s provision for notice and comment. Id. ...
. Oral argument was scheduled on July 11, 2017, pursuant to the normal briefing and hearing schedule under the local rules. L.R. 7-2(a). However, Defendants requested a thirty-day extension of Defendants’ time to file their opposition, and postponement of oral argument until August .22, 2017 due to “personal and professional commitments” of their counsel. Plaintiffs agreed to the request, apparently as a professional courtesy. Guidelines for Professional Conduct, Northern District of California, Section 3.
On July 20, 2017, Defendants opposed the .motion. Dkt. No. 26. They responded that ONRR’s. postponement was authorized under Section 705. Defendants also contended that the motion is premature because -the Court has not yet issued a case management schedule and Defendants have not had sufficient time to produce the administrative record. Id. Defendants argued that the motion should be denied or dismissed as premature, or. that consideration of it be stayed. Id.
' On August 4, 2017, Plairitiffs replied. Dkt. No. 27. Plaintiffs argued that the meaning of effective date in section 705 is clear and does not authorize an agency to postpone a rule that is already in effect. Id., Reply at 1. Further, Plaintiffs contended that .Defendants have not pointed to any need for examination of the administrative record to decide the purely legal question presented. Id.
On June 14, 2017, the States of Washington, Oregon, Maryland, and New York moved to file an amicus cu/dae brief in support of Plaintiffs. Dkt. No. 20. The Court granted their motion on June 16, 2017. Dkt. No. 21. Amici States argued that section 705 of the APA does not allow the retroactive suspension of a rule that has already gone into effect. Dkt. No. 20, Br. at 3. Furthermore, amici States- contended that the suspension under section
On August 16, 2017, only six days before the hearing on the motion for summary judgment and nine days after the issuance of the Repeal Rule (also more than four months after ONRR formally proposed repeal of the Rule), Defendants filed an administrative motion to postpone'oral'argument to October 3, 2017. In that motion, Defendants informed the Court that they intended to file a motion to dismiss based on Article III mootness due to the repeal. Defendants’ motion violated the requirement of Local Rule 6—1(b) requiring that a request to extend a court hearing date be filed' at least fourteen days in advance, so as not to disrupt the Court’s and the parties’ schedule, especially once briefing was complete (also fourteen days before the hearing), and the Court began preparing for the hearing.
Plaintiffs opposed the motion to postpone the hearing as violating the local rules and prejudicing them by prolonging the length of what they viewed as an illegal and harmful postponement'of the Rule.. On August 17, 2017, the Court denied the requested continuance as contrary to the Local Rule and inefficient because the Court had already fully prepared for the long-scheduled hearing on summary judgment.
On August 18, 2017, Defendants filed their motion to dismiss based solely on Article III mootness, noticed to be heard on October 3, 2017. Defendants did not move to shorten time for the hearing as permitted under Local Rule 6-1. Their notice of motion stated that this case is moot in the present tensе. Dkt. No. 39 at 2.
At the hearing on summary judgment, however, after the Court asked about the impact of the September 6, 2017 effective date of the Repeal Rule, Defendants stated that because the postponement of the Rule remained operative until the Repeal Rule took effect on September 6, 2017, prudential mootness rather than Article III mootness applied until September 6, 2017,-when the case would become mqot under Article III.
III. LEGAL STANDARD
Summary judgment shall be granted if “the pleadings, discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(c). Material facts are those which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc.,
A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion, and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material
IV. DISCUSSION
A. Prudential Mootness
ONRR published a ¡final rule repealing the Rule, effective as of September 6, 2017. Defendants moved to dismiss this case for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(h)(3). Subject matter jurisdiction presents a “threshold question!] which must be decided before [the Court] address[es] the merits.” Am. Rivers v. Nat’l Marine Fisheries Serv.,
Here, the repeal of the Rule is not effective until September 6, 2017. At the hearing, Defendants acknowledged that the postponement under section 705 of the APA is operative in their.view until September 6, 2017, so the case is (at most) prudentially moot now, and not moot under Article III until September 6, 2017.
The Ninth Circuit has not adopted the doctrine of prudential mootness outside of thе bankruptcy .context. Maldonado v. Lynch,
Even if the doctrine of prudential mootness were to apply, however, the motion is not prudentially moot. Prudential mootness is an equitable doctrine, under which the Court should exercise its discretion, Fletcher v. United States,
As remedies, Plaintiffs seek a declaration that Defendants violated the APA by-postponing the effective date of the Rule and - vacatur of the postponement. With respect to declaratory relief, Plaintiffs’ argument is well taken that leaving the postponement in place casts a “continuing and brooding presence” over the parties and any subsequent challenge that might be made to the repeal of the Rule. Super Tire Eng’g Co. v. McCorkle,
Declaratory relief is an appropriate and meaningful remedy for the additional reason that Defendants’ approach to repealing the Rule is sufficiently likely to be repeated without being subject to judicial review to cut against application of prudential mootness.
Defendants have shown through the circumstances of this case that they can move quickly to engage in notice and comment rulemaking to repeal ah unwanted regulation after postponing its implementation after the effective date, thereby frustrating those aggrieved by the interim repeal from obtaining a judicial ruling on the misuse of Section 705. See Greenpeace Action v. Franklin,
An inherent aspect of the application of an equitable doctrine is whether declaratory relief is necessary to achieve basic fairness. See Paradise,
Finally, as the Ninth Circuit’ has repeatedly held, “there is a continuing public interest in determining the appropriate legal principles” by which Defendants promulgate rules and regulations affecting the value of revenue generated from coal produced from Federal and Indian leases. See Joint Bd. of Control of Flathead, Mission & Jocko Irrigation Dists. v. United States,
' Accordingly, a meaningful remedy is available in the form of declaratory relief and the motion would not be prudentially moot even if that were a viable doctrine in the Ninth Circuit outside of the bankruptcy context. As set forth in the later discussion on remedies, the Court declines to also issue vacatur under these circumstances.
B. Standard of Review
Defendants argue.that the APA may set aside agency action only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, ..., in excess of statutory jurisdiction, authority, or limitations, or short of statutory right; [or] without observance of procedure required by law,” 5 U.S.C. § 706, focusing on the standard of review under the first clause regarding arbitrary action and abuse of discretion on matters within the agency’s, discretion. Defendants contend that review under this standard “is narrow, and a court is not to substitute its judgment for that-of the agency.” Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins.,
That standard, however, is not applicable to actions short of statutory right or taken in violation of -legally required procedures. To the contrary, section 706 provides that, “[t]he reviewing court shall ... hold unlawful and set aside agency action, findings, and conclusions found to be ... in excess of statutory jurisdiction, authority, or limitations, or short of statutory right.” 5 U.S.C. § 706(2)(C). The “arbitrary and capricious” standard forms a separate basis to set aside agency action, 5 U.S.C. § 706(2)(A), and it is that standard which Motor Vehicle Manufacturers Association characterized as narrow.
As Plaintiffs persuasively argue, the ONRR’s decision to postpone the Rule is not entitled to deference. Chevron U.S.A., Inc. v. Natural Res. Def. Council,
The underlying dispute here, however, centers upon ONRR’s application of section 705 of the APA. Under Mead Corp., “administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to' the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.”
Section 705 of the APA provides:
When an agency finds that justice so requires, it may postpone the effective date of action taken by it, pending judicial review. On such conditions as may be required and to the extent necessary to prevent irreparable injury, the reviewing court, including the court to which a case may be taken on appeal from or on application for cer-tiorari or other writ to a reviewing court, may issue all necessary and appropriate. process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings.
Plaintiffs argue that postponing the effectiveness of the Rule after it had gone into effect contradicts the plain, language of the statute. Plaintiffs point to the only decision on this issue, Safety-Kleen Corp. v. EPA, 1996 U.S. App. LEXIS, *2 (D.C. Cir. Jan. 19, 1996), which held that seсtion 705 does not permit an agency to suspend a promulgated rule without notice and comment.
Defendants contend instead that the deadline for invoking agency postponement authority under the first sentence of section 705 is not the effective-date, but what they term the “compliance date” of February 28, 2017 at which time the first reports and royalty payments were due. Defendants argue that Plaintiffs’ interpretation of effective date makes little practical sense and would frustrate Congressional intent. They contend that in many instances, an agency will not have time to exercise its § 705- authority after a lawsuit is filed and before the challenged rule’s stated effective date. Defendants do not cite a part of the Rule in which the “compliance date” is designated, but instead rely on ONRR Director Gould’s recent declaration to characterize February-28, 2017 as the compliance deadline. Dkt. No. 26, Gould Decl. ¶ 4.
Defendants also argue that “compliance dates” are the “dates with teeth,” and section 705 is meant to allow an agency to maintain the status quo pending judicial review. At the hearing, however, Defendants acknowledged that the Rule began to require compliance when it went into effect on the effective date “in a buildup” to the compliance date of February 28, 2017. Thus, rather than being toothless as of, the effective date and only suddenly acquiring a set of teeth as of the February compliance date, in actuality the Rule imposed compliance obligations starting on its effective date of January 1 that increased over time but did not abruptly commenсe at the end of Februaiy..
Plaintiffs respond that Defendants’ attempt to- read additional language into the statute to permit them to delay a rule after its effective date, but before the passing of compliance deadlines, fails. As the Supreme Court cautioned in Bates v. United States,
As the Court of Appeals for the District of Columbia explained:
Upon consideration of the motion of intervenors to vacate administrative stay, the responses thereto and the reply, it is ORDERED.that the motion be granted. Respondent improperly justified the stay based on 5 U.S.C. § 705 (1994). That statute permits an agency to postpone the effective date of a not yet effective rule, pending judicial review. It does pot permit’the agency to suspend without notice and comment a promulgated rule, as respondent has attempted to do here. If the agency determines the rule is invalid, it may be able to take advantage of the good cause exception, 5 U.S.C. § 553(b).
Safety-Kleen Corp. v. EPA, 1996 U.S. App. LEXIS, *2-3 (Jan. 19, 1996). The Court finds that reasoning persuasive. The plain language of the statute authorizes postponement of the “effective date,” not “compliance dates.” 5 U.S.C. § 705. Effective and compliance dates have distinct meanings. See Silverman v. Eastrich Multiple Inv’r Fund, L.P.,
Furthermore, amici States persuasively argue that because ONRR sought and secured stays in the cases challenging the Rule in the District of Wyoming, ONRR improperly invoked section 705 to suspend the effective date of the Rule pending its ultimate repeal rather than pending judicial review as required by section 705. The announced purpose of the postponement was that “[i]n light of the pending litigation, ONRR has decided to postpone the effective date of the 2017 Valuation Rule until the litigation is resolved pursuant to section 705 of the APA.” Dkt. No. 15-2, Ex. 2 at 1 (emphasis added). Thus, ONRR acknowledged the other limit of its section 705 authority to postpone in addition to “effective .date,” i.e., “pending judicial review,” yet ONRR blocked judicial review by obtaining a stay in the Wyoming litigation to pursue the Repeal Rule instead.
Even if the Court could ignore the plain language of the statute, Defendants’ policy argument that the ’Court should construe section 705 to include “compliance dates” because section 705 is meant to allow an agency to maintain the status quo pending judicial review is unpersuasive. Defendants’ position undercuts regulatory predictability and consistency. See Price,
Similarly, Defendants’ argument that recent questions and complaints raised new issues justifying the postponement does not justify acting outside of statutory authority. Moreover, entities which would be subject to the Rule had copious opportunities to raise objections and concerns about implementation during the lengthy notice and comment period. Indeed, as Defendants acknowledged at oral argument, many, if not all, of the same -objections raised by the plaintiffs challenging the Rule in the District of Wyoming were advanced during the five-year long rulemak-ing process. Presumably, they did so in light of the requirement to exhaust their administrative remedies. Lands Council v. McNair,
Finally, Defendants’ argument that construing the effective date literally and not also as the “compliance date” can in some circumstances unduly shorten the agency’s opportunity to postpone. a rule’s imрact when faced with litigation is unpersuasive in light of the additional provision of section 705, which allows the agency to seek broad relief from the reviewing court. See 5 U.S.C. § 705 (“On such conditions as may be required and to the extent necessary to prevent irreparable injury, the reviewing court, including the court to which a case may be taken on appeal from or on application for certiorari or other writ to a reviewing court, may issue all necessary and appropriate process to postpone the effective date of an agency action or to preserve status or rights pending conclusion of the review proceedings.”) (emphasis added). Thus, ONRR could have asked the court to stay the implementation of the regulation, instead of unilaterally issuing its own “stay,” аs it characterized the postponement on' its website;
1. Relationship between Section 705 and Section 553(d) of the APA
At the hearing, Defendants argued that section 705 does not incorporate or cross reference effective date under section 553(d) of the APA, as section 705 applies to all agency action, rather than just rule-making. See 5 U.S.C. § 705 (allowing an agency to postpone “action taken by it”); 5 U.S.C. § 551(13) (defining agency action to include “the whole or a part of an agency rule, order, license, sanction, relief, or the equivalent or denial thereof, or failure to act”). Defendants make the leap that the definition of effective date in section 705 must therefore be more capacious, than the definition of effective date in section 553(d).
Their argument is not persuаsive. While section 705 allows the postponement of the effective date of a broader range of agency actions than a complete rule, such as a part of a rule or a license, that does not alter the plain meaning of “effective date.”
D. Compliance with Notice-and-Comment Requirements
Plaintiffs and amici States argue that ONRR also violated the APA’s notice- and-comment requirements by effectively repealing the. Rule without allowing the public an opportunity for meaningful comment. Sections 553(b) and (c) of the APA set forth the notice-and-comment requirements for agency “rule making.” 5 U.S.C. § 553. “Rule making means agency process for formulating, amending, or repealing a rule.” 5 U.S.C. § 551(5). Citing Environmental Defense Fund, Inc. v. Gorsuch,
Defendants respond that section 705 does not refer to notice-and-comment requirements. Citing Hoctor v. U.S. Department of Agriculture,
Furthermore, the policy underlying the statutory requirement of notice-and-comment is equally applicable to repeal of regulations as to their adoption. As Consumer Energy Council of Am. v. Fed. Energy Regulatory Comm’n,
Y. REMEDY
Having found that Defendants violated the APA, the Court must fashion the appropriate remedy under the circumstances of this case. Plaintiffs have requested declaratory relief and vacatur. For the reаsons discussed in Section IV.A, declaratory relief is the proper remedy for Defendants’ violation of the APA. The Court grants a declaration that Defendants’ postponement of the effective date of the Rule was contrary to law.
Plaintiffs also contend that the Court should order vacatur of the postponement of the Rule because it is required under the APA, see 5 U.S.C. § 706(2), and is the “standard remedy” when a court concludes that an agency’s conduct was illegal under the APA. See Stewardship Council v. Envt’l Protection Agency,
The more difficult question is the disruptive consequences that would result from vacatur. On the one hand, Plaintiffs, argue that vacatur with reinstatement of the Rule will provide the required legal and regulatory clarity by ensuring that the-illegal action has no further legal effect, especially given the potential -that the repeal of the Rule will be appealed and possibly vacated at some point after September 6, 2017, and the postponement of the Rule could perhaps be argued to remain in place (albeit declared unlawful).
On the othеr hand, if the Court granted vacatur, the Rule would only be in place for a few days before the Repeal Rule takes effect. Therefore, although Plaintiffs are correct that vacatur is the usual remedy for illegal rulemaking under the APA, vacatur would be unduly disruptive because it would require the industry to comply with the Rule for only a ,short time before switching gears to comply with its predecessor. See Idaho Farm Bureau Federation v. Babbitt,
YI. CONCLUSION
Accordingly, the Court GRANTS Plain- ' tiffs’ motion for summary judgment on its claim for declaratory relief that Defendants violated the APA when they postponed the Rule under Section 705.
IT IS SO ORDERED.
Notes
. The Court need not decide whether that threshold .would be crossed if Article III mootness applied.