TERRY TEMPEST WILLIAMS & BROOKE S. WILLIAMS D/B/A TEMPEST EXPLORATION CO., LLC
196 IBLA 386 Decided April 8, 2021
TERRY TEMPEST WILLIAMS & BROOKE S. WILLIAMS D/B/A TEMPEST EXPLORATION CO., LLC
IBLA 2017-37 Decided April 8, 2021
Appeal from a decision of the State Director, Utah State Office, Bureau of Land Management, rejecting noncompetitive oil and gas lease offers. UTU-91481 & UTU-91574.
Affirmed as modified.
APPEARANCES: Erik Schlenker-Goodrich, Esq., Western Environmental Law Center, Taos, New Mexico, for Terry Tempest Williams and Brooke S. Williams d/b/a Tempest Exploration Co., LLC; James E. Karkut, Esq., Office of the Regional Solicitor, U.S. Department of the Interior, Salt Lake City, Utah, for the Bureau of Land Management.
OPINION BY ACTING ADMINISTRATIVE JUDGE BALLENGER1
Terry Tempest Williams and Brooke S. Williams, d/b/a Tempest Exploration Co., LLC (collectively, Tempest) have appealed an October 18, 2016, decision by the Utah State Office, Bureau of Land Management (BLM) (Decision). In the Decision, the BLM Utah State Director denied Tempest’s noncompetitive offers to obtain oil and gas leases over two parcels (UTU91841 and UTU91574).
1 Administrative Judge Haugrud took no part in the consideration or decision of this appeal.
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SUMMARY
BLM denied Tempest’s noncompetitive oil and gas lease offers submitted under the Mineral Leasing Act (MLA)2 and its implementing regulations3 based on Tempest’s public statements of intent not to develop the leased resources until development can occur in a sustainable and non-polluting way. BLM concluded that these statements of intent were inconsistent with the terms of the MLA and lease requiring that the lessee exercise “reasonable diligence” in the development of leased resources. Tempest argues that BLM erred in two respects. First, Tempest asserts that it was treated inconsistently from other similarly situated parties who were awarded leases without inquiry into their prospective diligence. We find that Tempest’s circumstances materially distinguish its posture from that of the other parties cited. Second, Tempest argues that its commitment not to develop the leased resources unless and until they can be used in non-polluting ways or with a full internalization of the social costs is consistent with the concept of reasonable diligence. We conclude that the concept of reasonable diligence as used in the MLA and lease is not broad enough to accommodate Tempest’s positions regarding development. Accordingly, Tempest does not show error in BLM’s decision, which we affirm, as modified to the extent that it was based on a conclusion that Tempest had committed not to develop the leases under any circumstances.
BACKGROUND
Factual Background
BLM offered the two parcels at issue in a competitive lease sale on February 16, 2016, but neither received bids.4 This rendered the parcels available for noncompetitive leasing for a two-year period.5 After attending the sale, Tempest submitted the completed lease form, processing fee, and first-year advanced rental for its noncompetitive lease offer for UTU91481,6 and two days later did the same for UTU91574.7 For each, Tempest signed BLM Form 3100-11, “Offer to Lease and Lease for Oil and Gas,” which included a term requiring the lessee to “exercise reasonable
2 30 U.S.C. §§ 181-287. Citations to statutes are to the most recent version of the U.S. Code, published in 2018. 3 43 C.F.R. Part 3100. Citations to regulations are to the most recent version of the Code of Federal Regulations, published in 2019. 4 See Administrative Record (AR), BLM Utah State Office, Feb. 16, 2016, Oil & Gas Lease Sale Results; Answer to Statement of Reasons at 5 (filed Sept. 19, 2017) (Answer). 5 See 30 U.S.C. § 226(b)(1)(A), (c); 43 C.F.R. §§ 3110.1(b), 3120.6. 6 See AR, Offer to Lease and Lease for Oil and Gas, UTU91481 (Feb. 16, 2016). 7 See AR, Offer to Lease and Lease for Oil and Gas, UTU91574 (Feb. 18, 2016).
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diligence in developing and producing, and . . . prevent unnecessary damage to, loss of, or waste of leased resources”8 as mandated by Section 30 of the MLA.9
Shortly after the sale, Ms. Williams participated in a radio interview regarding the offers in which she stated “[w]e’re at a crossroads . . . where the paradigm is changing” through “the end of the fossil fuel era” and “a just transition.”10 When asked how Tempest would develop its leases, she responded “I don’t know” but noted a desire to “fuel [the] movement to keep it in the ground” and proffered the theory that “whether it’s developed, or whether it’s retired, that is completely within the law.”11 On March 29, 2016, Ms. Williams published an essay in the opinion pages of the New York Times entitled “Keeping My Fossil Fuel in the Ground.”12 In that essay, Ms. Williams stated that she attended the lease sale “to protest the leasing of these lands to oil and gas companies planning to drill for fossil fuels” and that Tempest will “keep whatever oil and gas lies beneath these lands in the ground . . . until science finds a way to use those fossil fuels in sustainable, nonpolluting ways.”13 She stated again that “[o]ur energy development is fueling a movement to keep it in the ground” and explained that the lease offers were “done with a coyote’s grin.”14
On April 15, 2016, BLM wrote to Tempest “to ensure that you understand your obligations under the leases if issued, and to request that you clarify statements you made about your intentions with respect to these leases” in the N.Y. Times essay.15 BLM highlighted for Tempest Section 4 of the lease offer forms, requiring “that the lessee must exercise reasonable diligence in developing and producing the leased resource” in accordance with Section 30 of the MLA.16 To that end, BLM inquired regarding Ms. Williams’ published statement of intent to “keep whatever oil and gas lies beneath these lands in the ground” and requested that, within 30 days, Tempest advise BLM regarding whether it “would accept the duty to exercise reasonable diligence in developing and
8 See, e.g., id. at Lease Terms, Section 4. 9 See 30 U.S.C. § 187 (“Each lease shall contain provisions for the purpose of insuring the exercise of reasonable diligence, skill, and care in the operation of said property .. ”). 10 AR, Transcript from KUER News Interview (Feb. 19, 2016). 11 Id. 12 AR, Terry Tempest Williams, Opinion, Keeping My Fossil Fuel in the Ground, N.Y. TIMES, Mar. 29, 2016 (N.Y. TIMES Op.). 13 Id. 14 Id. 15 AR, Letter from Jenna Whitlock, BLM, to Terry Tempest Williams dba Tempest Exploration at unpaginated (unp.) 1 (Apr. 15, 2016). 16 Id. at unp. 1-2.
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producing oil and gas from the two leases you have offered to purchase rather than keeping the resources ‘in the ground’ as stated in” the N.Y. Times essay.17
Tempest responded by letter dated May 2, 2016.18 With respect to the issue of diligence, Tempest cited a dictionary definition of the term and suggested that the additional lease obligation to “prevent unnecessary damage to, loss of, or waste of lease resources” is “guaranteed if no development occurs.”19 It asserted that the lease terms could be satisfied “whether or not we intend to drill” and that the lease provides the right to explore for and produce resources but does not require it.20 Tempest went on to question the distinction between its “intent to hold onto [the leases] until science research allows a sustainable use of the hydrocarbons with a resulting increase in value” and that of others who acquired leases in hopes that development would become more profitable and held them without developing them.21 Tempest suggested that future scientific research may eliminate the environmental impacts of burning fossil fuels and that “‘suspending’ leases would be prudent in contrast to making any additional significant investment prior to knowing the impact of the ‘Keep it in the Ground’ movement.”22 Tempest concluded by noting that its “goal is to play a role in making . . . a graceful transition and transformation” from carbon-based energy extraction to renewable energy sources on public lands.23
On June 17, 2016, Tempest followed up with a letter to BLM stating, among other things, that “we are in this for the long term and choose to hold onto our leases until new technologies can be developed that will allow the oil and gas resources to be developed and burned without producing climate-warming gases that currently are negatively impacting the future of life on earth.”24 In a July 11, 2016, radio interview, Ms. Williams again stated that Tempest had “no intention of drilling on those lands” but “for different reasons” than oil and gas companies who acquired leases.25 She stated “we have to change our ways” and confirmed that Tempest did not intend “to drill on these
17 Id. 18 AR, Letter from Tempest Exploration to Jenna Whitlock, BLM (May 2, 2016) (May 2016 Letter). 19 Id. at unp. 2. 20 Id. 21 Id. at unp. 3. 22 Id. at unp. 4; id. at unp. 5 (“[W]e may explore and possibly develop our leases as science allows such development with an increase in value of the resources.”). 23 Id. at unp. 5. 24 AR, Letter from Tempest Exploration to Jenna Whitlock, BLM at unp. 2 (June 17, 2016) (June 2016 Letter). 25 AR, Transcript, The Hour of Land, Living on Earth (recorded July 11, 2016), at 40.
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lands until science can s[how] us that the fossil fuels are [worth] more above land than below given the costs of climate.”26
In a letter dated August 16, 2016, Tempest again questioned whether it was being treated differently than “others who purchased leases that day with no intention of drilling.”27 It opined that Section 30 of the MLA and Section 4 of the lease form, which require “‘the exercise of reasonable diligence . . . in operation’” of leased property, do not require an “intent to develop oil and gas resources, but rather if or when a lessee does so they must carry out their operations in a way that is careful and prevents damage or waste.”28 Tempest went on to invoke Section 6 of the lease form, which requires that operations be conducted “in a manner that minimize[s] adverse impacts to the land, air, and water, to cultural, biological, visual, and other resources, and to other land uses or users,” arguing that the social costs of burning oil come to $301 per barrel and “it would be unethical to produce oil until the going price incorporates the social costs” or “until science can develop technologies that decrease the greenhouse-gas emissions and the damage they cause thereby lowering the social costs.”29
By letter dated October 18, 2016, BLM rejected Tempest’s noncompetitive lease offers.30 BLM emphasized the “diligent development requirement” rooted in MLA Section 30, noting that a “fundamental requirement of every oil and gas lease, as stated in Section 4 on page 3 of Form 3100-1, is the requirement that the ‘Lessee must exercise reasonable diligence in developing and producing, and must prevent unnecessary damage to, loss of, or waste of leased resources.’”31 BLM concluded that “an expressed intent by a person offering to purchase a lease to not develop and produce the oil and gas resources on the leasehold would directly conflict with the diligent development requirement and require that the offer be rejected.”32 BLM then went on to recount portions of the above-described media reports of Tempest’s stated intentions regarding the leases.33 Based on those reports, “[v]iewed objectively and in their totality,” BLM concluded that Tempest’s “express statements to date show intent to not diligently explore for and produce the oil and gas resources underlying the two lease parcels.”34
26 Id. at 39, 40. 27 AR, Letter from Tempest Exploration to Jenna Whitlock, BLM at unp. 2 (Aug. 16, 2016) (Aug. 2016 Letter). 28 Id., Attachment (Att.) at unp. 1. 29 Id., Att. at unp. 1-3. 30 AR, Letter from Edwin L. Roberson, BLM to Tempest Exploration (Oct. 18, 2016) (Decision). 31 Id. at unp. 1. 32 Id. 33 Id. at unp. 2. 34 Id.
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BLM therefore rejected the lease offers because Tempest “stated publicly that [it] intend[s] to keep the oil and gas resources in the ground and, therefore, not comply with the diligent development requirement plainly set forth in [its] noncompetitive lease offers.”35
Tempest timely filed a Notice of Appeal of the Decision in November 2016 and a Statement of Reasons (SOR) in July 2017. BLM submitted its Answer in September 2017.
Legal Background and Standards of Review
The MLA “gave the Secretary of the Interior broad power to issue oil and gas leases on public lands,” which includes “discretion to refuse to issue any lease at all on a given tract.”36 This discretion to refuse to lease remains even where the land has been offered for lease and a qualified applicant has been selected, surviving to the point of lease issuance.37 The Board will affirm BLM’s exercise of this discretionary authority on the Secretary’s behalf where “the record . . . disclose[s] a rational basis for the rejection . . . sufficient to establish that the decision was not arbitrary, capricious, or in error.”38 As we have stated,
35 Id. 36 Udall v. Tallman, 380 U.S. 1, 4 (1965); see Schraier v. Hickel, 419 F.2d 663, 666 (D.C. Cir. 1969); Continental Land Resources, 162 IBLA 1, 7 (2004); GeoResources, Inc., 99 IBLA 369, 371 (1987) (“Inherent in the discretion to lease is the discretion not to lease.”); David A. Provinse, 76 IBLA 340, 342 (1983). 37 Hawkwood Energy Agent Corp., 189 IBLA 164, 165 (2017); Roy G. Barton, 188 IBLA 331, 336 (2016) (“We have long held that ‘[u]ntil such time as a lease actually issues, BLM always reserves the right not to lease at all.’”) (citing S. Utah Wilderness All., 144 IBLA 70, 90 (1998)); see also McDonald v. Clark, 771 F.2d 460, 463 (10th Cir. 1985). 38 GeoResources, Inc., 99 IBLA at 371; see Roy G. Barton, 188 IBLA at 334 (“BLM’s decision to reject a high bidder’s offer . . . must be supported by a rational basis, and ‘the record [must] support[] the conclusion that the public interest would be served by rejection.’”) (quoting George G. Witter, 129 IBLA 359, 363 (1994)); Continental Land Resources, 162 IBLA at 7 (“[A]n exercise of discretion must be supported by a rational and defensible basis which is set forth in the decision, or it will be found to be arbitrary and capricious.”); Pogo Producing Co., 138 IBLA 142, 154 (1997), reversed sub nom IMC Kalium Carlsbad, Inc. v. Babbitt, 32 F. Supp. 2d 1264 (D.N.M. 1999), reversed sub nom IMC Kalium Carlsbad, Inc. v. Interior Bd. of Land Appeals, 206 F.3d 1003 (10th Cir. 2000) (“[T]he record must disclose a rational basis for the rejection and must be sufficient to establish that the decision was not arbitrary, capricious, or in error.”); David A. Provinse, 196 IBLA 391
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In challenging such a decision, an appellant has the burden to demonstrate, by a preponderance of evidence, that BLM committed a material error in its factual analysis or that the decision generally is not supported by a record showing that BLM gave due consideration to all relevant factors and acted on the basis of a rational connection between the facts found and the choice made.[39]
DISCUSSION
On appeal, Tempest states that “the Board need only address . . . two issues.”40 First, Tempest argues that BLM erred by not treating it the same as similarly situated bidders. Second, Tempest argues that BLM erred by too narrowly defining “reasonable diligence.” We address each argument below.
I. BLM Did Not Violate the Requirement to Treat Like Cases Alike.
While it concedes that “BLM has discretion to deny noncompetitive lease [offers],” Tempest observes that BLM’s exercise of such discretion must be “grounded in rational, neutrally-applied principles” and “not arbitrary and capricious.”41 It asserts that the Decision violated these standards because it was based on the fact “that the Williamses failed to prospectively show ‘diligence’” despite “BLM’s longstanding practice” to issue leases “without regard to a ‘diligence’ showing.”42 It argues this makes the Decision “arbitrary and capricious for . . . treat[ing] like cases differently.”43
Tempest claims in part that “BLM’s decision to single out the Williamses for differential treatment violated . . . the Williamses’ constitutional right to equal protection of the laws.”44 However, as a general rule, “the Board does not adjudicate Constitutional questions of law. Adjudication of the Constitutional implications of BLM’s actions is for
76 IBLA at 342 (“This Board will uphold the refusal to issue a lease provided BLM has set forth its reasons for doing so and provided the background data and facts of record support the conclusion that the refusal is required in the public interest.”). 39 Roy G. Barton, 188 IBLA at 335; see Hawkwood Energy Agent Corp., 189 IBLA at 167-68. 40 Statement of Reasons at 1 (filed July 5, 2017) (SOR). 41 Id. at 1-2, 10. 42 Id. at 1-2; id. at 10 (asserting “the Utah BLM has been unable to identify any other instance in which a Utah BLM office prospectively evaluated the ability of a bidder to exercise ‘diligence’ in developing a lease as a basis for granting or rejecting a bid”); id. at 12. 43 Id. at 10. 44 Id. at 11.
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the judicial, not the executive, branch of the Federal government.”45 Accordingly, we will not further address Tempest’s constitutional claims.
Tempest argues alternatively that “BLM’s decision to single out the Williamses for differential treatment violated the ‘fundamental norm of administrative procedure’ that ‘requires an agency to treat like cases alike.’”46 Tempest asserts that BLM’s typical practice of issuing “noncompetitive leases on a first in time, first in right basis, assuming the applicant is qualified,” is “supported by the plain language of the relevant statute.”47 It is undisputed that the Williamses are qualified to hold a lease and paid all required fees,48 and Tempest argues that “[n]owhere in the plain language of the [lease or MLA] is there a requirement that the lessee prospectively demonstrate as a condition of lease issuance that it will exercise diligence.”49
To support its argument that BLM treated it differently from other prospective oil and gas lessees, Tempest specifically identifies BLM’s treatment of Victoria Ramos and, more generally, BLM’s treatment of oil and gas companies.
A. BLM’s treatment of Victoria Ramos
Tempest first focuses significant attention on the example of Victoria Ramos, who acquired oil and gas lease UTU91541 at a May 17, 2016, BLM lease sale.50 Tempest notes that Ms. Ramos was living in a homeless shelter at the time and lodged her successful bid, seemingly without a full understanding of the circumstances, after
45 Maralex Resources, Inc., 186 IBLA 34, 50 (2015); see John Keady, 190 IBLA 41, 43-44 (2017) (“[I]t is well established that the Board does not adjudicate Constitutional questions of law.”); Mark Patrick Heath, 175 IBLA 167, 196 (2008) (“This Board has long held that it is not the proper forum for deciding constitutional questions. Thus, we will not address Heath’s constitutional equal protection claims here. They would properly be submitted to the Federal courts.”); Laguna Gatuna, Inc., 131 IBLA 169, 173 (1994) (“It is well established that the Department of the Interior, as an agency of the Executive branch of the Government, is not the proper forum to consider constitutional challenges.”); Christopher C. Slone v. OSMRE, 114 IBLA 353, 363 (1990). 46 SOR at 11 (quoting Westar Energy, Inc. v. Fed. Energy Regulatory Comm’n, 473 F.3d 1239, 1241 (D.C. Cir. 2007)). 47 Id. (quoting 30 U.S.C. § 226(c)(1), which provides “the person first making application for [a noncompetitive] lease who is qualified to hold a lease under this Act shall be entitled to a lease of such lands without competitive bidding, upon payment of a non- refundable application fee of at least $75”). 48 Id. at 11. 49 Id. at 12. 50 Id. at 7, 13.
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registering as a bidder alongside a group of climate activists.51 Another individual in the group, Hans Ehrbar, covered Ms. Ramos’s bid “as a gift,”52 and Tempest provides with its appeal a declaration by Mr. Ehrbar, in which he states that “[b]ased on Victoria Ramos’ statements, [he] believed that Victoria Ramos’ intention was to keep the oil and gas on her lease in the ground.”53 He goes on to speculate that, “[e]ven if she wanted to develop her lease for oil and gas, I do not believe that she currently has the initiative, experience, and psychological resources to do so successfully.”54
The day after the lease sale, Ms. Ramos visited the BLM Utah offices in order to provide a missing signature on her bidder form, and discussed with BLM staff “what rights the lease would grant if issued.”55 When told “a lease holder has exclusive right to explore for oil and gas and develop if a discovery is made,” she inquired about “what it would take to drill the lease.”56 After BLM personnel explained elements of the exploration process and options related to partnering with an operator or selling the lease, “Ms. Ramos seemed amazed that she could obtain something of monetary value if the lease was to be issued to her” and “said that she was going to do more research on being a lease holder.”57 She also requested contact information for parties with a potential interest in developing or acquiring the lease.58 BLM issued the lease to Ms. Ramos two months later.59 The record suggests that Ms. Ramos returned several months later to examine the case records for the lease.60
Tempest asserts that “BLM has not provided a rational basis for rejecting the Williamses’ lease offers while granting Ms. Ramos’ lease.”61 But in doing so it glosses
51 Id. at 7-8. 52 Id. at 8-9. 53 Id., Att., Declaration of Hans Ehrbar ¶ 13. 54 Id. ¶ 15. 55 Supplemental (Supp.) AR, Conversation Record, Successful Competitive Bid on Parcel UT0516-023 UTU-91541 (May 18, 2016) (May 2016 Conv. Rec.). 56 Id.; Supp. AR, email from Kent Hoffman, BLM, to Lola Bird, BLM (July 8, 2016) (July 8 Hoffman email) (noting Ramos “asked questions regarding how to drill on the lease and/or profit from it (drilling costs, overriding royalty, sale/assignment of lease etc)”). 57 May 2016 Conv. Rec.; see also July 8 Hoffman email (noting Ramos “[e]xpressed excitement that the lease could produce revenue if produced or sold to oil company”). 58 See July 8 Hoffman email (noting Ramos “[e]xpressed interest in development of lease (asked who to contact to finance and drill the lease – implies intent to diligently develop)”). 59 SOR at 9. 60 Supp. AR, Examination of Case/Card Record Request (Aug. 8, 2016). 61 SOR at 13.
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over the difference between its stated intent not to develop the resources on its leases absent fundamental shifts in technological or economic conditions and Ms. Ramos’ documented interest in pursuing development of the resources on hers under prevailing conditions. As BLM notes, “Ms. Ramos and Appellants were anything but ‘similarly situated bidders.’”62 Whereas Tempest “made it clear that they intended to not develop the resources underlying the lease parcels,” at least until “the going price of oil included its social costs (approximately $322 per barrel)” by its current estimate, Ms. Ramos “expressed her interest to BLM in learning how the resources underlying the lease parcel might be developed.”63 Based on these differences, we find that BLM had a rational basis, supported by the record, for distinguishing between the circumstances presented by Ms. Ramos and Tempest.
Tempest’s cited cases do not persuade us otherwise. In Colorado Interstate Gas Co. v. FERC, the court found that the agency had afforded “dissimilar treatment of evidently identical cases, on the same day,” while providing no “plausible distinction for simultaneous, apparently contradictory acts” which it deemed “the quintessence of arbitrariness and caprice.”64 And in Westar Energy, Inc. v. FERC, the court stated that, to treat cases differently, the agency need only “point to a relevant distinction between the two cases” and had failed to do so.65 Unlike the circumstances in these cases, however, here, the record supplies a rational basis for BLM’s different treatment of Ms. Ramos and Tempest: while Tempest stated that it did not intend to develop its leases absent foundational changes in circumstances, Ms. Ramos expressed an interest in developing her lease under existing conditions. Mr. Ehrbar’s personal skepticism regarding Ms. Ramos’ ability to do so is not sufficient to carry Tempest’s burden in disputing BLM’s rational, record-based distinction. Because Ms. Ramos and Tempest presented distinguishable circumstances, BLM was justified in handling them differently.
B. BLM’s treatment of other oil and gas operators
Tempest next argues that it is being treated differently from oil and gas companies that bid on leases with an intent to hold them until “economic conditions become favorable for drilling,” and “frequently seek” suspensions that “allow companies to extend their ability to hold their leases with no development of them, rent free.”66 BLM responds to Tempest’s arguments by acknowledging its typical practice of issuing leases without inquiring into diligence but noting Tempest “created the unique situation
62 Answer at 19. 63 Id. 64 850 F.2d 769, 774 (D.C. Cir. 1988). 65 473 F.3d at 1241-43. 66 SOR at 13 (stating that “BLM applies the ‘diligence’ requirement differently to theselease holders than to the Williamses”).
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necessitating that inquiry” by making several public statements “expressing the view that[it] did not intend to explore for or develop the resources underlying the two lease parcels.”67 BLM goes on to argue, “[m]ore importantly,” that how BLM has treated other bidders and offerors is “simply not relevant to this appeal,” which implicates only Tempest’s “representations about their intentions to keep the resources underlying the two lease parcels for which they submitted lease offers in the ground and BLM’s decision based on those representations to reject the offers.”68
We agree with BLM that Tempest has not identified an actual deviation from prior practice in the instant case. Tempest focuses first on the assertion that BLM does not generally inquire into companies’ prospective diligence, which BLM concedes. However, there is a material difference between declining to affirmatively investigate a party’s unstated intentions and consciously ignoring a party’s stated intentions. Tempest identifies no prior instance of BLM knowingly disregarding a lease offeror’s express public statements of intent not to diligently develop the requested resource rights as required by the lease terms.
To the contrary, the Board’s decision in Pogo Producing Co.69 illustrates that BLM has previously considered such statements (rare as they may be) to be quite relevant to its leasing decisions. In that case, BLM had rejected applicants’ high bid for a potash lease under the MLA based on its conclusion that the bid was made for the purpose not of developing potash, but of prioritizing oil and gas production from the lands.70 BLM based its decision on the applicants’ prior pursuit of oil and gas development in the area and their “own statements” suggesting that they had no desire or intent to develop potash if awarded the leases.71 While the Board ultimately found that the record contained sufficient evidence of the applicants’ intent to develop potash and reversed BLM’s decision to reject the applicants’ bids,72 it rejected the applicants’ argument that it
67 Answer at 17. 68 Id. at 20. 69 138 IBLA 142 (1997). 70 Id. at 144. 71 Id. at 144-45; id. at 152 (describing BLM counsel’s argument “that when, prior to lease issuance, BLM receives credible information evidencing an intent not to develop the minerals, the agency must exercise its discretion to reject the bid since such an intent is tantamount to a fraud on the Government”). 72 Id. at 157 (“[W]e find that appellants’ expressed desire to produce both oil and gas and potash does not suffice to establish that appellants’ bid was made in bad faith. BLM’s speculation that appellants seek the potash lease in order to develop oil and gas resources not only lacks factual underpinnings, but also ignores the fact that a potassium lease grants the lessee the right to produce potash and associated minerals, not oil and gas.”).
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Moreover, the type of decision-making by oil and gas operators cited by Tempest bears little to no resemblance to this situation, as discussed further in section II. Nor isTempest similarly situated to operators who hold leases and make the demonstrations necessary to obtain a suspension of operations and/or production.75 Suspensions are a tool used by BLM and operators to manage lease terms within the construct of a lessee’s obligation to pursue development with reasonable diligence, not in lieu thereof,76 and we explore the issues with Tempest’s posture in that regard in section II.
73 Id. at 147. 74 Id. at 153-54. 75 See 30 U.S.C. § 209 (providing that the Secretary may grant a suspension “in the interest of conservation”); 43 C.F.R. § 3103.4-4(a) (providing that BLM may grant or direct suspensions “in the interest of conservation of natural resources” or when operations are prevented by force majeure). 76 See, e.g., Alfred G. Hoyl (On Reconsideration), 123 IBLA 194A, 194P (1993) (discussing BLM policies designed “to ensure the granting of a suspension assists development of the lease and to avoid retention of the lease for speculative purposes” and to aid in “decidingwhether a suspension is sought in good faith as part of an effort to develop the lease”); Alfred G. Hoyl, 123 IBLA 169, 191 & n.18 (1992) (“a suspension of the lease term in the interest of conservation is required where delays imposed upon the lessee due to administrative actions addressing environmental concerns have the effect of denying the lessee’s operator ‘timely access’ to the property . . . and may be granted where activity must be suspended on a lease to prevent environmental damage” which “would generally be warranted only ‘where operations have commenced and production has occurred’”); see also U.S. GOV’T ACCOUNTABILITY OFF., GAO-18-411, OIL AND GAS LEASE MANAGEMENT, BLM COULD IMPROVE OVERSIGHT OF LEASE SUSPENSIONS WITH BETTER DATA AND MONITORING PROCEDURES at 8 (2018), https://www.gao.gov/assets/gao-18-411.pdf (last visited Apr. 6, 2021) (“BLM guidance states that before an operator can request a suspension, the operator must first demonstrate being hampered in performing some operation or activity on the lease. The operator must submit thorough documentation of the reason for requesting a suspension and should include evidence that activity has
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II. Tempest Has Not Shown Error in BLM’s Application of the Statutory and Contractual Obligation of Reasonable Diligence.
Tempest’s second principal argument is that diligence “is evaluated contextually, taking into consideration economic factors,” and “[a] lessee shows ‘diligence’ even if it is not developing oil and gas if it can demonstrate that development would currently be uneconomical.”77 It argues this standard is met here, where “given the social cost of carbon, development would currently be uneconomical on a societal scale,” and states that Tempest intends “to forgo drilling until technologies could be developed that would make fossil fuel development economical on a societal scale.”78 BLM responds by reiterating the Decision’s conclusion “that Appellants’ expressed intent to not develop and produce the oil and gas resources underlying the two lease parcels would directly conflict with [the diligent development requirement from the lease and the MLA], thus requiring BLM to reject Appellants’ offers.”79
The MLA requires that each lease “contain provisions for the purpose of insuring the exercise of reasonable diligence, skill, and care in the operation of said property.”80 Although neither the MLA nor its implementing regulations expressly define the concept of “reasonable diligence” as used in the statute and lease, the Board has recognized that “reasonable diligence” represents “[w]hatever, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both lessor and lessee,” aligning it with the well-established “prudent operator” rule
been attempted on the lease, such as filing an application for a drilling permit, and that the activity has been prevented by actions beyond the operator’s control.”). 77 SOR at 14, 2. 78 Id. at 14. 79 Answer at 15. 80 30 U.S.C. § 187.
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prevalent throughout Board and Federal court precedent.81 Tempest embraces this as the applicable standard and presents its arguments within the framework of that standard.82
“The conceptual basis of the prudent operator rule lies in the fact that oil and gas leases are business arrangements entered into with an expectation of financial gain on both sides.”83 Put most succinctly, it stands for the basic proposition that “[i]f a lessee can make a profit by drilling the well, he should drill.”84 To that end, “whether a prudent operator would [undertake additional development] is determined by whether there is reasonable expectation that the cost of additional wells as well as a reasonable profit on the investment might be returned.”85 The Board has recognized BLM’s test for whether development would be economic under the prudent operator rule as whether “it can produce a sufficient quantity of oil or gas to pay reasonable profit to the lessee over and
81 CSX Oil and Gas Corp., 104 IBLA 188, 196 (1988); see State of Wyoming v. United States Dep’t of the Interior, 2020 U.S. Dist. LEXIS 243863, *58 (D. Wyo. Oct. 8, 2020) (“The MLA incorporates the ‘prudent operator’ standard through the provisions requiring lessees to exercise ‘reasonable diligence, skill, and care’ in the operation of the lease and subjecting Federal leases to the condition that lessees will use ‘all reasonable precautions to prevent waste of oil or gas developed in the land.’”); see also Newell v. Phillips Petroleum Co., 144 F.2d 338, 339 (10th Cir. 1944); Brimmer v. Union Oil Co., 81 F.2d 437, 440 (10th Cir. 1936); Burlington Resources Oil and Gas Co., 146 IBLA 335, 343 (1998) (“Whatever, in the circumstances, would be reasonably expected of operators of ordinary prudence, having regard to the interests of both lessor and lessee, is what is required.”); Great W. Onshore Inc., 133 IBLA 386, 391 (1995). 82 See SOR at 14 (“In the oil and gas context, ‘reasonable diligence’ means doing ‘that which an experienced operator of ordinary care and prudence would do in the same or similar circumstances . . . having due regard for the rights, interests, and advantages of both lessor and lessee.’” (citing Newell v. Phillips Petroleum Co., 144 F.2d at 339; Brimmer v. Union Oil Co., 81 F.2d at 440)). 83 Burlington Resources, 146 IBLA at 342; Great W. Onshore Inc., 133 IBLA at 391. 84 Atl. Richfield Co., 105 IBLA 218, 227 (1988); cf. 43 C.F.R. § 3107.1 (defining “diligent” drilling operations for purposes of holding a lease past its primary term as those “anyone seriously looking for oil or gas could be expected to make in that particular area, given the existing knowledge of geologic and other pertinent facts”). 85 Magnolia Petroleum Co. v. Wilson, 215 F.2d 317, 318 (10th Cir. 1954) (noting lack of diligence was also reflected in the fact that the lessee “has declared positively that it does not intend to undertake further developments now or in the foreseeable future. In effect, it intends to sit on the lease, do nothing ”).
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above the cost of drilling and operating the well,” such as operational expenses and taxes.86
Tempest asserts each lessee has the right to select its own “chosen economic calculus” to inform the definition of diligence.87 However, as the above-described principles make clear, the applicable “standard of conduct is objective,” such that a party “cannot justify its act or omission on personal grounds or by reference to its peculiar circumstances.”88 Rather, “[t]he prudent operator is a reasonable man engaged in oil and gas operations.”89 Accordingly, “the question is not what was meet and proper for this [lessee] to do, given its peculiar circumstances, but what a hypothetical operator acting reasonably would have done, given circumstances generally obtained in the locality.”90 In this way, the “prudent operator standard is distinguishable . . . from a standard based on
86 Great W. Onshore Inc., 133 IBLA at 391; see Burlington Resources, 146 IBLA at 342; see also BLM Manual MS-3160, Drainage Protection Manual at 2-14 to 2-16 (Sept. 21, 2015), https://www.blm.gov/sites/blm.gov/files/uploads/mediacenter_blmpolicymanual3160. pdf (last visited Apr. 6, 2021) (setting out the elements that BLM considers relevant to the determination of whether additional drilling would be economic under the prudent operator standard, including gross production, net production, price, revenue, expenses (of drilling, completion, and operation), taxes, reasonable rate of return, and discount rate); cf. 43 C.F.R. § 3160.0-5 (defining “production in paying quantities” for purposes of holding a lease past its primary term as oil and/or gas “of sufficient value to exceed direct operating costs and the cost of lease rentals or minimum royalties”); Abe M. & George Kalaf, 134 IBLA 133, 138 (1995) (defining production in paying quantities “as production sufficient to yield a reasonable profit after payment of all the day-to-day costs incurred after the initial drilling and equipping of the well, that is, the costs of operating the well, including workovers and maintenance, rendering the oil or gas marketable, and transporting and marketing that product”). 87 SOR at 10 (arguing “the Williamses’ showing that they plan to develop their leases when circumstances become favorable, based on . . . their chosen economic calculus . . . demonstrates ‘diligence’”); id. at 15 (“a plan to develop leases when circumstances become favorable based on a lessee’s chosen economic calculus . . . meets [the reasonably diligent development] standard”); see also Answer at 17 (“Appellants essentially contend that the diligent development requirement provides a lessee the discretion to develop its lease(s) whenever it chooses to do so based on whatever economic calculus it decides to utilize ...... ”). 88 5 WILLIAMS & MYERS, OIL AND GAS LAW § 806 (2013). 89 Id. 90 Id.
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a lessee’s subjective good faith.”91 Therefore, Tempest’s conduct must be judged objectively against what an ordinary prudent oil and gas operator would be reasonably expected to do, and Tempest’s suggestion that the identified standard for reasonable diligence can be individualized “based on a lessee’s chosen economic calculus” cannot be sustained.
Tempest cites Eggleson v. McCasland92 for the proposition that an operator’s “diligence” should be “evaluated contextually, taking into consideration economic factors,” and that a lessee may be diligent “even if it is not developing oil and gas if development would be uneconomical.”93 While those principles ring true, Tempest attempts to extrapolate them for the proposition that its diligence should be judged against its own personal definition of the thresholds for deeming development “economic” – i.e., its “chosen economic calculus.”94 But Eggleson itself confirms what was discussed above: that the governing principles require us to evaluate a lessee’s conduct against what “would be reasonably expected of operators of ordinary prudence.”95 While this standard is properly applied to individual factual contexts, its substance is not malleable to the customized preferences of individual lessees.
Tempest accepts that the applicable standard requires the thresholds it has identified as preconditions to development to align with those “an experienced operator of ordinary care and prudence” would apply to make similar decisions,96 but it makes no meaningful argument demonstrating that it satisfies this standard. To the contrary, Tempest consistently emphasizes the purposefully substantial differences between the thresholds it has adopted and those used by typical oil and gas operators.97 While the conditions Tempest has declared must be satisfied before it will pursue development may
91 CSX Oil and Gas Corp., 104 IBLA at 196; see also Burlington Resources, 146 IBLA at 344-45 (rejecting lessee’s attempt to impose its own standards for what would constitute economic development); cf. Louis Samuel, 8 IBLA 268, 273 (1972) (applying distinct “reasonable diligence” standard under Section 31 of the MLA, noting it “is primarily an objective test dependent not upon the personal situation of the lessee, but upon what action a reasonably diligent person would take. It is not a protean standard with differing applicability to different lessees; rather it is a fixed criterion which all lessees must meet ...... ”). 92 98 F. Supp. 693, 695 (E.D. Okla. 1951). 93 SOR at 14. 94 Id. at 14-15. 95 98 F. Supp. at 695 (finding diligence because a reasonably prudent operator would not have pursued additional development given the absence of a market for production from the lease). 96 See supra note 82. 97 See, e.g., supra notes 10-14, 18-29, and accompanying text.
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represent its view of “ordinary care and prudence,” the standard of reasonable diligence does not allow each lessee to define that concept for itself, but rather stakes the standard objectively to what would reasonably be expected of an experienced, ordinary, and prudent operator. When viewed through this proper lens, Tempest’s position on “reasonable diligence” does not comport with the meaning of this legal term of art as used in the relevant context. We do, however, agree that BLM’s decision must be modified to the extent that it is based on a conclusion that Tempest communicated an intent not to pursue development under any circumstances,98 as opposed to under the preconditions identified in its communications with BLM.
Tempest presents a number of arguments and references we take to be aimed at illustrating the flaws and risks it perceives in existing law and policy.99 However, these arguments are misdirected, as the Board in reviewing the propriety of BLM’s Decision is charged with applying existing law and policy, not creating or modifying it based on challenges to its wisdom. As BLM states, “while [Tempest’s] position might be seen as raising interesting policy issues, it falls far short of providing any governing legal principles that would support concluding that BLM’s understanding of the diligent development requirement is erroneous or that its decision lacks a rational basis.”100 Ms. Williams appears to have acknowledged this fact, conceding publicly that the “BLM employees . . . are just doing their jobs,” and Tempest’s real complaint lies with “Congress and how they view public land.”101 Until the reasonable diligence requirement found in the MLA is modified or redefined in the manner preferred by Tempest, we must apply the law as it stands.
Tempest also argues that its “economic calculus based on the social cost of carbon fulfills the BLM’s Congressional mandates” to “prevent unnecessary or undue degradation of the lands” and employ “principles of multiple use and sustained yield” in its leasing decisions pursuant to the Federal Land Policy and Management Act of 1976
98 See, e.g., Decision at unp. 1 (observing that “an expressed intent by a person offering to purchase a lease to not develop and produce the oil and gas resources on the leasehold would directly conflict with the diligent development requirement and require that the offer be rejected”); id. at unp. 2 (rejecting lease offers because Tempest “stated publicly that [it] intend[s] to keep the oil and gas resources in the ground and, therefore, not comply with the diligent development requirement plainly set forth in [its] noncompetitive lease offers”) (emphases added). 99 See SOR at 6-7 (discussing and citing models and studies regarding the costs to society of greenhouse gas emissions from producing and burning fossil fuels that “are not incorporated into market decisions to develop those fuels”). 100 Answer at 17. 101 AR, Brian Maffly, Auction of Utah oil & gas lease spurs author Terry Tempest Williams to (legally) buy lease, THE SALT LAKE TRIBUNE, Feb. 17, 2016.
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(FLPMA) and its implementing regulations.102 These mandates, however, do not alter the MLA’s mandate to ensure that any lease issued pursuant to that Act is operated with “reasonable diligence.” Further, the FLPMA mandates “recognize the need for latitude and discretion in their implementation” and afford BLM, as the Secretary’s delegate, “correlative powers of reasoned discretion . . . to be effective in discharging its statutory duties.”103 Tempest’s “mere disagreement”104 with BLM’s choices or “preference” for a different approach to planning and leasing “does not show that BLM’s weighing of the resource values was unreasonable or that its choice among competing resource uses was in error.”105
CONCLUSION
In light of the above, we find that Tempest has not shown that it was treated differently than similarly situated parties or that BLM erred in concluding its posture was inconsistent with the statutory and contractual obligation of reasonable diligence. We modify BLM’s decision to the extent it was based on the conclusion that Tempest had committed not to develop its leases under any circumstances, rather than a
102 SOR at 15 (citing 43 U.S.C. § 1732). 103 A.C.O.T.S., 60 IBLA 1, 4-5 (1981); see WildLands Defense, 192 IBLA 383, 403-04 (2018) (“FLPMA’s multiple-use mandate affords BLM significant discretion in managing public lands” toward “the appropriate balance to strike between competing resource uses, recognizing that not every possible use can take place on any given area of the public lands at any one time”); id. at 405 (“the broad language in FLPMA directing BLM to prevent unnecessary or undue degradation ‘leaves [the] BLM a great deal of discretion in deciding how to achieve’ this objective”); W. Watersheds Project, 188 IBLA 250, 263 (2016) (“Given its broad language, it has been said that ‘§ 1732(b) ‘leaves [the] BLM a great deal of discretion in deciding how to achieve’ the[] objectives [of preventing unnecessary and undue degradation], because it does not specify precisely how the BLM is to meet them, other than by permitting the BLM to manage public lands by regulation or otherwise.’” (citing Gardner v. BLM, 638 F.3d 1217, 1222 (9th Cir. 2011)); see also Theodore Roosevelt Conservation P’ship v. Salazar, 616 F.3d 497, 518 (D.C. Cir. 2010) (holding BLM “has substantial discretion to decide how to achieve the multiple use and sustained yield objectives” and noting that each action does “not have to protect all current and possible uses,” as when “the Bureau’s decisions become more granular, the uses maximized by each project necessarily become more limited” but “those decisions may still be part of the Bureau’s overall management under the principles of multiple use and sustained yield” at a larger scale). 104 A.C.O.T.S., 62 IBLA 43, 44 (1982) (holding BLM’s exercise of such discretion cannot be defeated by “[m]ere disagreement . . . even though the position of disagreement may have arguable basis”). 105 WildLands Defense, 192 IBLA at 404.
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determination that Tempest’s stated preconditions to development did not comport with the applicable legal standard for the obligation of “reasonable diligence.” Accordingly, pursuant to the authority delegated to the Board of Land Appeals by the Secretary of the Interior,106 we affirm BLM’s October 18, 2016, Decision, as modified.
I concur:
106 43 C.F.R. § 4.1.
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