Solenex, LLC v. Bernhardt, Secretary, U.S. Department of the Interior: Cancellation of 1982 Oil and Gas Lease Upheld – Significant Cultural and Religious Lands of the Badger-Two Medicine Area in Montana

Introduction and Setting

          On June 16, 2020, the United States Court of Appeals for the District of Columbia wrote what could be the last chapter in a long-running dispute over an oil and gas lease issued by the U.S. Bureau of Land Management (“BLM”) in 1982 (“Solenex Lease”) for lands in the culturally-significant and environmentally-sensitive Badger-Two Medicine Area (“Two Medicine Area”) in Montana, administered by the U.S. Forest Service (“USFS”).  The D.C. Circuit reversed the district court and upheld the BLM’s long-delayed cancellation of the Solenex Lease, which had been issued on lands bounded by Glacier National Park, the Scapegoat and Bob Marshall Wilderness Areas, and the Blackfeet Indian Reservation. Solenex, LLC v. Bernhardt, Secretary, U.S. Department of the Interior, D.C. Circuit Cause No. 18-5343 (June 16, 2020).

While not within the Blackfeet Indian Reservation, the Two Medicine Area:

includes high mountain peaks and river valleys, and it offers relative isolation and a supply of high-quality plants, animals and minerals, all of which are central to the Blackfeet people’s religious, spiritual, and cultural practices. . . .  [I]t remains a place of spiritual power for the Blackfeet people because . . . Blackfeet “can go, as they have been for centuries in accordance with their beliefs and traditions, to be along near Creator Sun while still standing on Mother Earth so that their prayers can be heard by these two Creators.”

Slip Op. at 3-4 (quoting Joint Appendix, 2023).  The Two Medicine Area also functions as a habitat for bald eagles, grizzly bears, gray wolves, elk, lynx, wolverines, and other species. Id. at 4.

A Selected Chronological History of the Solonex Lease and Administrative, Legislative, and Judicial Proceedings

The Solenex Lease has or had a long, tortured history, the key events of which are captured in the following chronology, which is important to the Court of Appeals’ decision:

DATEEVENT/DEVELOPMENT
1982After Environmental Assessment pursuant to the National Environmental Policy Act (”NEPA”) prepared, the Solonex Lease was issued to Sidney Longwell, with a no surface occupancy restriction; the Lease “did not convey an unrestricted right to drill . . . Longwell was required to obtain permission from [BLM and USFS] before drilling.” Slip Op. at 4.
July 1983Department of the Interior (“DOI”) amended oil and gas leasing regulations to provide that leases are subject to cancellation if improperly issued
November 1983Lessee submitted Application for Permit to Drill (“APD”) to BLM; thereafter, in the APD  review process, U.S. Fish and Wildlife Service issued a Biological Opinion under the Endangered Species Act (“ESA”): the proposed drilling would jeopardize the grizzly bear and gray wolf.  Slip Op. at 5.
January 1985After APD was modified, BLM approved the APD.
1985Blackfeet Tribe and conservation groups appealed to the Interior Board of Land Appeals (“IBLA”), alleging violations of NEPA, ESA, and other statutes. Slip Op. at 6.
1985IBLA set aside the APD approval and concluded BLM failed to consider whether a proposed access road would impact cultural resources. Id.
October 1985Lessee’s application to place the lease in suspension was granted, and obligations to pay rentals and minimum royalties were suspended. Id.
1987-1990BLM and USFS prepared an Environmental Impact Statement and comprehensive cultural and historical study, which included input from Blackfeet Tribe. Id. at 6-7.
1993After yet further administrative proceedings, BLM approved the APD once again.
1993Blackfeet tribal members and conservation groups filed suit in federal court alleging NEPA, National Historic Preservation Act (“NHPA”) and American Indian Religious Freedom Act (“AIRFA”) violations, together with violations of the international Convention Concerning the Protection of the World Cultural and Natural Heritage.  Id. at 7.
1993Lawsuit stayed following introduction of the Badger-Two Medicine Projection Act, S. 853, 103d Cong. (1993), which would ban surface-disturbing activities in the Two Medicine Area.  Id.
USFS determined that the Two Medicine Area included a “property eligible for the National Register of Historic Places.  “Id. at 8.
2002USFS designated the “Badger-Two Medicine Blackfoot Traditional Cultural District” – initially adjacent to the Solenex Lease and then expanded to encompass the Lease. Id.
2006Congress withdrew the Two Medicine Area from disposition under mineral leasing laws “subject to valid existing rights,” and providing tax incentives for lessees who relinquished their leases in the area, and Solonex declined to relinquish.  Id.
June 2013Solenex sued the DOI in the U.S. District Court for the District of Columbia alleging unreasonable delay in agency action.
July 2015U.S. District Court granted relief to Solonex and ordered BLM and USFS to submit a schedule for resolution of the lease suspension. Id. at 9.
September 2015Advisory Council on Historic Preservation (“ACHP”) recommended (a) revocation of drilling approval and (b) lease cancellation.
March 17, 2016Secretary of Interior issued a decision cancelling the Solonex Lease, reasoning drilling would violate NEPA and NHPA. Id. at 10.
Solonex supplemented its Complaint and challenged the lease cancellation, arguing the Secretary lacked authority to cancel
September, 2018District court granted summary judgment to Solonex stating that (a) DOI had unreasonably delayed making decisions; (b) Solonex’s reliance interest foreclosed cancellation; and (c) cancellation violated the Administrative Procedure Act. Id. at 11.
June 16, 2020D.C. Circuit decision on appeal, as discussed in this article.

 

The Court of Appeals’ Decision and Reasoning

          Considering this record, the D.C. Circuit reversed the district court, ruling that the lower court erred in holding the lease cancellation was arbitrary and capricious based on alleged delay and Solonex’s asserted reliance interests.

Acknowledging that the Administrative Procedure Act (“APA”) “gives courts the authority to ‘compel agency action unlawfully withheld or unreasonably delayed[,]’” Slip Op. at 14,(quoting APA, 5 U.S.C. § 706(1)), the Court of Appeals said that the neither the APA nor relevant authority address “whether agency action that has been taken can be invalidated solely on the amount of time preceding that action.”  Id. (emphasis in original).  The court continued:

In other words, delay in itself does not render agency action unlawful.  What matters for the arbitrary-and-capricious analysis are the identified consequences or harms that flow from the agency delay.

Id.  The court also considered the “reasonableness” of the delay:

[T]he reasonableness of delay is a function of context.  Here, it was the product of extensive and complex environmental, cultural, historical, and religious challenges to the agency decision, which were then compounded by intervening legislation that forbade drilling in the area –which was the sole purpose of the Lease. . . .

Id. at 15.

Further, with respect to the question or harm flowing from delay, the Court of Appeals observed that neither Solonex nor the district court could

point to any actual adverse consequences arising from the delay itself.  That is unsurprising because the Secretary [of the Interior] kept the running of the Lease term suspended during each round of administrative and judicial review and tolled the leaseholders’ obligation to pay rents and royalties to the agency.

Id. at 14-15.  According to the Court of Appeals, the district court’s use of “generalized” reliance interests was error: “[U]nidentified and unproven reliance interests are not a valid basis on which to undo agency action.  Instead the harm occasioned must be specifically identified, reasonably incurred, and causally tied to the delay.” Id. at 17(citing Mingo Loan Coal Co. v. EPA, 829 F.3d 710, 722-23 (D.C. Cir. 2016) and Bell Atlantic Tel. Cos. v. FCC, 79 F.3d 1195, 1207 (D.C. Cir. 1996) (stating that reliance interests incurred when an issue had long been in dispute were not reasonable, and evaluating only “investment incurred in reliance on the prior” position)).

As noted above, from the beginning, the agencies made it clear that the leasing decision was a first step and that further approvals, including any approval of an APD would be “‘subjected to an environmental analysis’ that would ‘consider not only the effects of the proposal on the lease area, but also the cumulative effects of the proposal in relation to other activities in the affected area.’”  Id. at 15.  The record was rife with clear communications that before any ground-disturbing activities could be authorized, further environmental, cultural, and religious analyses would be required.

Moreover, throughout its tortured history, the Solonex Lease remained in suspense “to avoid any accompanying obligations on [the lessee’s] part.” Id. at 16.

In short, from the Lease’s inception, the various leaseholders, including Solenex, were aware that the NEPA and Historic Preservation Act analyses would be necessary prior to any surface-disturbing activity and that drilling permits were not guaranteed. The Secretary’s painstaking efforts to ensure that the agency’s statutory duties were met distinguishes this case from a long period of unexplained agency inaction. A failure to cancel the Lease earlier in the process, with less information, could not have been the sounder or legally compelled course of action.

Id. at 17.

Implications of Solonex v. Bernhardt

          This decision provides a recent and useful reminder of the difficulties of challenging agency actions long delayed or withheld pursuant to  the APA’s 5 U.S.C. § 706(1).   The case constitutes a further cautionary tale regarding leases issued with “no surface occupancy” restrictions, particularly when the lease is issued in environmentally or culturally sensitive areas.

Finally, while the Presidential election remains months away, should Mr. Biden win the Presidency, the lessons learned and actions taken in this lengthy proceeding could provide a road map for his administration should they take the provocative step of seeking cancellation of federal oil and gas leases.   Many might suggest the unusual facts here render this case unique.  With a strong position stated in support of an aggressive response to climate change,[1] however, a Biden administration could examine existing coal and oil and gas leases with an eye toward cancellation as part of initiatives to move toward a net-zero emissions goal by 2050.  Such a step likely would only follow other actions that would be low hanging fruit.

 

[1] See https://joebiden.com/climate/.

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