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Volume XXXII, Number 2, 2015 F E D E R A L — M INING F E D E R A L — O I L & G AS M I C H A E L R. M C C ARTHY C O N S T A N C E L. R OGERS — R E P O R T E R — — R E P O R T E R — BLM’S USE OF THE SIX-YEAR AVERAGE COMMODITY PRICE THE BLM’S FINAL HYDRAULIC FRACTURING RULES WAS REASONABLE FOR DETERMINING MINING CLAIM On March 20, 2015, the Bureau of Land Management (BLM) VALIDITY issued its final rule for hydraulic fracturing on federal and tribal In Freeman v. U.S. Department of the Interior, No. 1:12-cv- lands, and on March 26, 2015, the final rule and the BLM’s 01094, 2015 WL 1213657 (D.D.C. Mar. 17, 2015), the plaintiff responses to public comments were published in the Federal sued the U.S. Department of Interior (DOI) challenging the Register. See Hydraulic Fracturing on Federal and Indian Lands, Interior Board of Land Appeals’ (IBLA) affirmance of the Bureau 80 Fed. Reg. 16,128 (Mar. 26, 2015) (to be codified at 43 C.F.R. of Land Management’s (BLM) mine claim validity determination pt. 3160) (effective June 24, 2015). that the plaintiff had not established the discovery of a valuable The stated intent of the rule is to ensure the integrity of mineral deposit. See United States v. Freeman, 179 IBLA 341, hydraulically fractured wells, protect water quality, and provide GFS(MIN) 16(2010). The dispute stemmed from the plaintiff’s the public with information on fracturing fluid constituents. Id. at ownership of 161 placer and association placer claims for nickel 16,128. The BLM received more than 1.5 million public com- in the Siskiyou National Forest in southern Oregon. Freeman, ments in the rulemaking process. Id. 2015 WL 1213657, at *3. The plaintiff applied for a mineral patent on 151 of the claims in September 1992, before Congress The Western Energy Alliance and the Independent Petroleum imposed the patent moratorium effective October 1, 1994, but the Association of America have challenged the rule in the U.S. moratorium prevented the BLM’s review and processing of the District Court for the District of Wyoming, arguing that the rule plaintiff’s patent application. Id. The plaintiff then filed a plan of is duplicative and will create an unnecessary regulatory burden. operations with the U.S. Forest Service (Forest Service) in 2000, See Petition for Review of Final Agency Action, Indep. Petroleum continued on page 2 continued on page 3 E NVIRONMENTAL I SSUES R A N D Y D ANN — R E P O R T E R — NINTH CIRCUIT ADDRESSES EFFECT OF PRIVATE PARTY The case arose out of contamination of the soil and ground- SETTLEMENTS IN CERCLA CONTRIBUTION ACTIONS water in an industrial area in Sacramento, California. Valley On April 2, 2015, the U.S. Court of Appeals for the Ninth Industrial Services, Inc. (VIS) operated an industrial dry cleaning Circuit held, among other things, that (1) in allocating liability to and laundry business at the site and released perchloroethylene a nonsettling defendant in a Comprehensive Environmental (PCE) into the environment during its operations. VIS eventually Response, Compensation, and Liability Act (CERCLA), 42 merged into Texas Eastern Overseas, Inc. (TEO), which assumed U.S.C. §§ 9601–9675, contribution action, a district court has VIS’s liabilities. VIS was a wholly-owned subsidiary of Petrolane, discretion to determine the most equitable method of accounting Inc. during part of the time VIS operated the site. In 1983, for settlements between private parties; and (2) a party can seek Petrolane sold the site, ultimately to AmeriPride Services Inc. contribution under 42 U.S.C. § 9613(f)(1) only for settlement (AmeriPride). During AmeriPride’s ownership of the site, there costs that were necessary response costs consistent with the were additional releases of PCE. “The contamination at the . national contingency plan (NCP). See AmeriPride Servs. Inc. v. site migrated onto a neighboring property owned by Huhtamaki Tex. E. Overseas Inc., 782 F.3d 474 (9th Cir. 2015). Foodservices, Inc. (Huhtamaki), and contaminated groundwater wells owned by California-American Water Company (Cal-Am). continued on page 6 page 2 MINERAL LAW NEWSLETTER F E D E R A L — M I N I N G MINERAL LAW NEWSLETTER continued from page 1 EDITORS which the Forest Service eventually denied, prompting the Mining - Mark S. Squillace Oil and Gas - John S. Lowe plaintiff to file a takings lawsuit with the U.S. Court of Federal University of Colorado Southern Methodist University Claims. Id. Because the takings lawsuit “turns on whether [the plaintiff] possesses a compensable property right against the REPORTERS United States,” the court of claims stayed the case and remanded Alabama - Edward G. Hawkins Montana - Colby L. Branch & to the DOI for a determination of the validity of the plaintiff’s Hawkins Law Firm L.L.C., Mobile Joshua B. Cook placer claims. Id. The BLM commenced its validity determina- Alaska - J.P. Tangen, Anchorage Crowley Fleck PLLP, Billings tion, and the administrative law judge (ALJ) ruled “that the Joseph J. Perkins, Jr. & Nebraska - Annette M. Kovar plaintiff had ‘failed to establish . a discovery of a valuable Jonathan E. Iversen Nebraska Department of Environmental Quality, Lincoln mineral deposit.’” Id. at *1. The IBLA affirmed the ALJ’s Stoel Rives LLP, Anchorage Nevada - Thomas P. Erwin decision. Id. Arizona - James P. Allen Snell & Wilmer L.L.P., Tucson Erwin & Thompson LLP, Reno The plaintiff then sued the DOI, BLM, and IBLA under Arkansas - Thomas A. Daily New Mexico - Stuart R. Butzier the Administrative Procedure Act alleging that the validity Daily & Woods, P.L.L.C., Fort Smith Modrall Sperling, Albuquerque determination of the plaintiff’s placer claims was arbitrary California - Donovan C. Collier & Elizabeth A. Ryan and capricious. See id. at *1 & n.2. Specifically, the plaintiff Brent McManigal Carson Ryan LLC, Roswell Gresham, Savage, Nolan & Tilden, North Dakota - Ken G. Hedge challenged the determination that the plaintiff had not made a PC, San Bernardino Crowley Fleck PLLP, Williston discovery of a valid mineral deposit. Id. at *4. Patrick G. Mitchell Ohio - J. Richard Emens To satisfy the validity requirement, “the discovered deposits Mitchell Chadwick LLP, Roseville Emens Wolper, Columbus must be of such a character that a person of ordinary prudence Kevin L. Shaw Oklahoma - James C.T. Hardwick would be justified in the further expenditure of his labor and Mayer Brown LLP, Los Angeles Hall Estill, Tulsa means, with a reasonable prospect of success, in developing a Colorado - Anya P. Mallett Pacific Northwest Ballard Spahr LLP, Denver Carlin A. Yamachika valuable mine.” Id. at *6 (quoting United States v. Coleman, 390 Sheryl L. Howe, Welborn Sullivan Day Carter & Murphy LLP, Portland U.S. 599, 602 (1968)). Procedurally, in claim validity contest Meck & Tooley, Denver Pennsylvania - Joseph K. Reinhart proceedings the BLM has the initial burden before the ALJ of Congress/Federal Agencies Babst Calland, Pittsburgh presenting a prima facie case that a claim is invalid, after which Robert C. Mathes Kevin M. Gormly the burden shifts to the claimant to establish by a preponderance Bjork Lindley Little PC, Denver Vorys, Sater, Seymour & Pease LLP Pittsburgh of the evidence that the claim is valid. Id. at *3. Using its Mineral Environmental - Randy Dann Davis Graham & Stubbs LLP, Denver South Dakota - Dwight Gubbrud Commodity Price Policy (MCP), the BLM applied a six-year Federal - Michael R. McCarthy Bennett, Main & Gubbrud, P.C. average for the price of nickel when determining the value of the Parsons Behle & Latimer Belle Fourche mineral deposit at two different points in time, October 1994 (the Salt Lake City Texas - William B. Burford date of the patent moratorium) and October 2000 (the date of the Constance L. Rogers Kelly Hart & Hallman LLP Forest Service’s denial of the plaintiff’s plan of operations). Id. at Davis Graham & Stubbs LLP, Denver Midland *7. The six-year average consisted of 36 months of average data FERC - Sheila Slocum Hollis & Utah - Andrew J. LeMieux Dennis J. Hough, Jr., Duane Morris Holland & Hart LLP, Salt Lake City on each side of the two points in time being analyzed, with futures LLP, Washington, D.C. West Virginia - Andrew S. Graham prices used for the forward 36 months. Id. “In other words, the Idaho - Jeffrey C. Fereday & Steptoe & Johnson, Morgantown MCP looks both backwards and forwards to estimate a reasonable Peter G. Barton Wyoming - Andrew A. Irvine nickel price.” Id. Givens Pursley LLP, Boise Andrew A. Irvine, P.C., Jackson Kansas - David E. Pierce, Washburn William N. Heiss, Casper The issue was critical because the MCP price for October University School of Law, Topeka 1994 was $3 per pound, and for October 2000, it was $2.93 per Louisiana - Adam B. Zuckerman Canada - Christopher G. Baldwin & pound. At the time of the contest proceedings before the ALJ, the Baker, Donelson, Bearman, Caldwell Christine Kowbel nickel price was $21 per pound. Id. After taking testimony and & Berkowitz, PC, New Orleans Lawson Lundell LLP, Vancouver other evidence, the ALJ held that the plaintiff had not submitted Michigan - Dennis J. Donohue & Eden M. Oliver, Michael Barrett, Gavin Carscallen & evidence justifying the use of a price higher than the MCP. Id. at Eugene E. Smary, Warner Norcross & Judd LLP, Grand Rapids Donald Greenfield *8. The IBLA affirmed, finding that the evidence did not support Bennett Jones LLP Minnesota - Aleava R. Sayre & Toronto & Calgary a price over $4 per pound. Id. The court affirmed the IBLA, Byron E. Starns, Stinson Leonard holding that “the application of the MCP in this case does not Street LLP, Minneapolis conflict with the prudent-person standard.” Id.