UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

W.A. MONCRIEF, JR., )
)
Plaintiff, )
)
v. ) Civil Case No. 17-609 (RJL)
)
UNITED STATES DEPARTMENT )
OF INTERIOR, )
> F I L E D
and )
) sEP 2 4 2018
JAMIE E. CONNELL, ) .

Cl k,U.S.D| &B k t
in her official capacity as State Director, ) Cog:ts for the hilr:t:rtlct o?%orlillr’n‘t:)¥a
Mom‘aml Dakotas Ojjice, Bureau of Land )

Management, )
)
Defendants. )

¢~`

MEMoRANDUM oPINIoN
september§f, 2018 [## 19, 21, 241

Plaintiff W.A. Moncrief, Jr. (“Moncrief’), the holder of a federal oil and gas lease
in Montana, brings suit against the United States Department of Interior (“Interior”) and
the Director of the Montana Bureau of Land Management (“BLM”) (collectively, “federal
defendants” or “the Government”) relating to the Governrnent’s cancellation of his lease
after suspending all oil and gas drilling and extraction activity on that lease for more than
thirty years. See Compl. [Dkt. # l] 111[ 9_ll, 48_59. Plaintiff seeks declaratory and
injunctive relief, including that this Court vacate the cancellation and reinstate the lease,
based on federal defendants’ alleged violations of the Administrative Procedure Act

(“APA”), 5 U.S.C. § 551 et seq. See Compl. 1[1] 60-86. Before this Court are the parties’

Cross-l\/lotions for Summary Judgment. See Pl.’s Motion for Summary Judgment [Dl<t.
#l9] (“Pl.’s l\/lot.”); Defs.’ Cross-l\/lotion for Summary .Iudgment [Dl<t. # 21] (“Defs.’
l\/lot.”); D'l".-lntervenor’s Cross-l\/Iotion for Summary Judgment [Dl<t. # 24] (“Df-
lntervenor’s l\/Iot.”). For the following reasons, the plaintiff’s motion for summary
judgment [Dl<t. # l9] is GRAN'I`ED and defendants’ motions [Dl<t. ## 2 l, 24] are DENIED.
Background
I. Procedural History

The W.A. l\/loncrief (“l\/loncrieli’) lease is one of several leases located in the
Badger-Tvvo l\/[edicine (“Badger~Tv\/o”) area in the Lewis and Clarl< National Forest in
northwestern l\/lontana.l ln 1981, the United States Forest Service (“Forest Service”)
prepared a l65-page Environmental Assessment (“EA”) of oil and gas drilling in the Lewis
and Clarl< National Forest, including the Badger-Tvvo area. See Non-Wilderness Leasing
Environmental Assessment, Joint Appendix (“J.A.”) Vol. Vl [Dkt. # 32-3] at 44-54 (FS-
HC-Ol4364-Ol4434). The EA considered alternatives to leasing, including “no action”
type alternatives, and engaged in American lndian Religious Freedom Act consultation
With the Blacl<l"eet Tribe. Sec id. at 50 (FS-HC-Ol4404). The Forest Serviee ultimately
issued a Decision Notice (“DN”) and Finding of No Signil'icant lmpact (“FONSI”),
approving “Alternative 3” Which granted leases “With surface occupancy...only for

accessible areas that could be protected” and provided that “[a]fter lease issuance, any

 

l Also before this court is a challenge to the Secretary’s cancellation ofthe lease previously
held by plaintiff Solenex LLC. See Solenex LLC v. Sally Jewcl ct al., Civil Case No. 13-
cv-993 (D.D.C.).

proposed oil and gas activities would be fully analyzed under NEPA.” Id. at 45~46 (FS-
l-lC-Ol4365-66).

The Forest Service issued Federal Lease No. 53320 to Randall L. Weeks (“Weel<s”
on June l, 1982. See lssuance of Lease, J.A. Vol. l [Dl<t. # 3l-l] at 69~80 (BLl\/l-
l\/lO()O764-774). Weel<s subsequently sold the lease to /-\tlantic Rich'['ield Corporationl
(“ARCO”) in December 1983 for $l.3 million. Sec l/13/84 Lease Assignment, J.A. Vol.
l at 49 (BLl\/l-l\/l000687). ln l\/lay 1988, ARCO requested a suspension ofthe lease while
BLl\/l was considering applications for permits to drill (“APD”) on other leases in the
Badger-Two area, including the leases owned by Fina Oil (subsequently acquired by
Solenex LLP) and Chevron, see 6/1/88 DOl Letter to ARCO, .l.A. Vol. l at 68 (BLl\/l-
l\/l000746), intending that suspension to “terminate upon completion of the Environmental
lmpact Statement for v[the:| pending application[s]...at which time the BLl\/l and Forest
Service would consider other drilling proposals.” Id. lt was with the understanding that
this was a “temporary suspension” that W.A. “l\/Ionty” l\/loncrief purchased the lease for
“Substantial consideration” on l\/larch l, 1989. See 6/l/82 Lease Assignment, J.A. Vol. l
at 66¢67 (BLl\/l-l\/lOOO740-74l); see also Deel. ofC.B. l\/Ioncrief(“l\/loncriefDecl.”) [Dkt.
# 19-2] 11 3.

The Forest Service and BLl\/l prepared a joint Environmental lmpact Statement
(“EIS”) and approved the Fina and Chevron APDS in 1991. Sce Forest Service R()D, J.A.
Vol. l at 106-07 (FSO()2148~2149). The BLl\/[ and Forest Service later withdrew approval
to seek further review of traditional practices in the Badger-Two area, but then approved

the Fina and Chevron APDS again in 1993. See l/l5/93 BLl\/l Letter to Fina Approving

3

APD with Conditions, J.A. Vol. l at 108 (F8002207). Yet even though the Chevron and
Solenex APDS had been approved, BLl\/l continued to suspend leases in the Badger-Two
Medicine area from 1993-1998, including the l\/Ioncrief lease. See generally Defs.’ l\/[ot.
at 7-9; Pl.’s l\/lot. at l2.2 ln 2002, after consultation with the Blackfeet Nation under
Section 106 of the NHPA` a portion ofBadger-Two area was designated as a “traditional
cultural district” or “TCD.” See l/3l/02 Determination of TCD Eligibility Notitication,
J.A. Vol. lV [_Dkt. # 32-l] at 201 (F8005942). 'l"his area did not originally include the
Solenex proposed well location or the l\/loncrief lease. Scc 2002 Map of Badger-Two
Medicine TCD, .l.A. Vol. l at 163 (F8004000). However, after l0 years of continued
consultation, additional acreage including the l\/loncrie’l"Lease was added to the TCD in
2012. See 9/2l/l5 ACHP Final Comments, J.A. Vol. l at 3-ll (F8006584-6592); 6/20/13
Letter re Boundary Expansion, J.A. Vol. l\/ at 223 (F8006010); 20l4 l\/lap of Badger-Two
l\/ledicine TCD, J.A. Vol. ll [Dkt. # 3 l-2] at 20 (FSOO4742).

Curiously, the Forest Service did not make a determination of adverse effects under
the NHPA until 2014,~ finding that there were no mitigation measures agreeable to the
Black'feet Tribe that would allow for development in the Badger-Two area. See l2/3/l4
Determination of Adverse Efl"ects, .l.A. Vol. V [Dkt. # 32-2] at 69¢79 (F8006532-654).

Additional consultations took place in 2015. Sec Defs.’ l\/lot. at 10. On September 2l,

 

2 Only in l998 did the Forest Service first cite “legislation to conserve and protect the
natural resources of the area” as the primary reason for suspending the l\/loncrief lease
from 1993-98. See 7/l5/98 Forest Service Letter to l\/loncrief, .l.A. Vol. l at 5 l~53
(BLl\/l-l\/l0007l7¢7l9).

2015, the Advisory Council of Historic Preservation (“ACHP”) recommended that the
Departments oflnterior and Agriculture cancel the Solenex lease. See ACl-IP Comments,
J.A. Vol. Vl at 8 (FSOO6590). Then on l\/larch l7, 2016, BLl\/l disapproved SoleneX’s APD
and cancelled its lease, claiming that the initial NEPA and NHPA analyses upon which its
leasing decision was based were inadequate See Defs.’ l\/lot. at ll.

ln late 2016, a l\/loncrief employee received a phone call informing it that its lease
would likely be cancelled as well. See Defs.’ Answer jj 56; Email l\/lessages, J.A. Vol. l
at 32 (BLl\/l-l\/l000665). l\/loncrief’s attorneys sent a letter to lnterior on November 23,
2016, requesting that the lease not be cancelled and also requesting a hearing. See ll/23/l 6
WPD&N Letter, .l.A. Vol. l at 84~85 (BLl\/l-l\/l000801-802). lnterior never responded to
l\/loncrief`s request for a hearing, but sent a letter decision administratively cancelling the
l\/loncriefLease on January 6, 20l7, in the waning days ofthe Obama administration See
l/6/l7 Letter to l\/loncrief, .l.A. Vol. l at 36-48 (BLl\/[-l\/l000670-682). lnterior
concurrently published a press release on January 6, 20l7 noting that all leases in the
Badger-Two area were being terminated. See l/6/l7 Press Release, J.A. Vol. l at 83
(BLl\/l-l\/l00800). l\/loncrief filed suit against lnterior and BLl\/l in this court on April 5,
20l7. Thus, l now must review the lawfulness of federal defendants’ cancellation of the
l\/loncrief lease.

II. Regulatory Landscape

Plaintiff l\/loncrief argues that the agency’s authority to administratively cancel a
lease is limited under the l\/lineral Leasing Act of 1920 (“l\/[LA”). 30 U.S.C. §§ l8l-287.
The l\/ILA governs the Secretary of lnterior’s (hereinafter “the Secretary”) authority to

5

issue leases for “[a]ll lands subject to disposition under this Act which are known or
believed to contain oil or gas deposits.” [a’. § 226(a). Pursuant to the l\/ILA, the Secretary
may also cancel those leases if the lease is (1) “in violation of the MLA, unless the current
leaseholder is a bona fide purchaser,” ia’. §§ 184(h)(1), (h)(2); (2) “when a lessee has
violated the statute, regulations, or the lease itself, ia’. § 188(a); or (3) “where the lessee is
in violation of lease provisions after at least 30-days’ notice” and the lease is a non-
producing lease, ia'. § 188(b). The Department of lnterior has also promulgated its own
regulations governing the cancellation of leases. See 43 C.F.R. §3108.5. Namely, the
Secretary can cancel leases for either (1) the lessee’s failure “to comply with any of the
provisions ofthe law, the regulations issued thereunder_, or the lease” after notice and 30
days to cure, 43 C.F.R. § 3108.3(a), or (2) the agency’s determination that thc lease was
“improperly issued.” lcl. § 3108.3(d).

As asserted by federal defendants, one of the ways in which the lease could be
“improperly issued” is by non-compliance with the National Environmental Policy Act
(“NEPA”) and the National Historic Preservation Act (“NHPA”). Defs.’ l\/lot. at 13.

7

NEPA requires that agencies take a “hard look’ at the environmental consequences,
Robertson v. MeI/iow Valley Cl`l'z'zens Cozmcz`l. 490 U.S. 332, 350 (1989), of“major Federal
actions” that “significantly affect[] the quality of the human environment.” 42 U.S.C. §

4332(C); 40 C.F.R. §§ 1501.3, 1501 .4(0).3 Nevertheless, an “agency is not constrained by

 

3 As our Circuit has held, “NEPA's requirements vary based on the type of agency action
in question ” Cz'ly ofPhoenl`x, Arizona v. Huerta, 869 F.3d 963, 971 (D.C. Cir. 2017),
opinion a/nencleal on reh’g, 881 F.3d 932 (D.C. Cir. 2018). lt is well settled that only
“[a]ctions with significant environmental effects require a full environmental-impact

6

NEPA from deciding that other values outweigh the environmental costs.” Roberlson, 490
U.S. at 350.

Federal defendants also allege that the lease at issue was in violation of the National
Historic Preservation Act (“NHPA”). Defs.’ l\/lot. at 14. NHPA requires that the agency
“take into account the effect of [an] undertaking on any historic property.” 54 U.S.C. §§
300308, 306108. This requires that the agency consult with the Advisory Council of
Historic Preservation and seek its comments. See ia’. Nl-lPA consultation is usually
considered adequate where the acting agency has “visited the site [and] consulted with the
preservation authorities” before concluding there will be no adverse impact on the historic
property. Duncan ’s Poz`nl'LoI Owne/”s Ass ’n Inc. v. F.E.R.C., 522 F.3d 371, 377 (D.C. Cir.
2008); see also Nat’l Pa/”ks Conservation Ass ’n v. Unz`tea’ States (“NPCA ”), 177 F. Supp.
3d 1 (D.D.C. 2016) (permitting mineral development in a designated Nl-»IPA historic district
after the Forest Service conducted an environmental assessment but not a full-blown
environmental impact statement). But, importantly here, neither NEPA nor NHPA dictates
a Substantive outcome. See, e.g., Sl'e)”ra Clal) v. Fea'e)”al Energy Regalatory Co)n)nl`ssion,
867 F.3d 1357, 1367 (_D.C. Cir. 2017) (“NEPA directs agencies only to look hard at the
environmental effects of their decisions, and not to take one type of action or another.”)
(internal quotation marks omitted); z`cl. (“[NEPA] is primarily information-forcing”);

Delaware Rl`ver/ceeper Nelwo/”k v. F.E.R.C., 753 F.3d 1304, 1310 (D.C. Cir. 2014) (“NEPA

 

statement” and that “[a]ctions with impacts that are not significant or are unknown require
a briefer environmental assessment.” lcl. at 971-72.

is ‘essentially procedural’ and designed to ensure ‘fully informed and well-considered
decision[s]’ by federal agencies) (quoting Vt. Yankee Nuclear Power Corp. v. NRDC, 435
U.S. 519, 558 (1978)); Nat’l Mi)il`ng Ass’n v. Fowler, 324 F.3d 752, 755 (D.C. Cir. 2003)
(“An essentially procedural statute, [NHPA] imposes no substantive standards on agencies,
but it does require them to solicit the Council’s comments and to take into account the
effect oftheir undertakings.”) (internal citation omitted).

Any agency action can be set aside under the APA where it is “arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A).
As articulated by the Supreme Court, “[t]he scope of review under the ‘arbitrary and
capricious' standard is narrow and a court is not to substitute its judgment for that of the
agency.” Molor Veln`cle Mfrs. Ass'n ofthe Un[z‘ea’ Stales, [nc. v. Sl'ale Far)n Mat. Auto. lns.
Co. (“State Farm”), 463 U.S. 29, 43 (1983). Nevertheless, even an action that is within the
agency’s statutory authority may still be arbitrary and capricious if the agency fails to
exhibit reasoned decision-making See Encz`no Motorcars, LLC v. Navarro, 136 S. Ct.
2117, 2126 (2016) (“‘Unexplained inconsistency’ in agency policy is ‘a reason for holding
an interpretation to be an arbitrary and capricious change from agency practice. ..”’); A/n.
Wl`ld Horse Pres. Ca)npal`gn v. Pe/”alae, 873 F.3d 914, 923 (D.C. Cir. 2017) (“A central
principle of administrative law is that, when an agency decides to depart from decades-
long past practices and official policies, the agency must at a minimum acknowledge the
change and offer a reasoned explanation for it.”). That is the lens through which l must
view the Government’s decision to cancel the l\/loncrief lease for purported pre-lease

violations of`NEPA and NHPA.

Analysis

I. The Court Need Not Resolve Whether Boesche Grants the Secretary
Unlimited Cancellation Authority

Under Federal Rule of Civil Procedure 56(a), summary judgment shall be granted
to the moving party “ifthe movant shows that there is no genuine dispute as to any material
fact.” li`ed. R. Civ. P. 56(a). Because this case challenges a final agency action under the
APA~_the cancellation of plaintiffs lease_to determine whether summary judgment is
warranted 1 must determine “whether the agency acted within the scope of its legal
authority, explained its decision, relied [on facts that] have some basis in the record,
and considered the relevant factors.” FunalforAni/nals v. Babbl'tt, 903 F. Supp. 96, 105
(D.D.C. 1995). Here, 1 consider whether the Department of lnterior and Bureau of Land
l\/lanagement, through the Secretary, acted reasonably in cancelling the Moncrief`lease after
more than thirsz years for an alleged pre-lease error.

As a preliminary matter, the parties disagree as to whether or not the l\/lLA grants
federal defendants either expansive or limited authority to administratively cancel leases
for pre-lease errors. Defendants and defendant-intervenors argue that the Secretary has the
inherent statutory authority to administratively cancel leases. Defs.’s l\/lot. at 14.
Defendants point to 43 U.S.C. §2, which authorizes the Secretary to “perform...all
executive duties...in anywise respecting ...public lands,” including to “correct [an] error
[]” ofher predecessor. Boesche v. Uclall, 373 U.S. 472, 478 (1963).

The Supreme Court in Boesche upheld the Secretary’s cancellation of a lease that

was “defective because it failed to include an adjoining 40-acre tract under application by

another party.” ld. at 484. Reviewing the legislative history of the MLA, the Court
observed that “[i]t would thus be surprising to find in the /-\ct, which was intended to
expand, not contract, the Secretary's control over the mineral lands of the United States, a
restriction on the Secretary's power to cancel leases issued through administrative errorj
a power which was then already firmly established.” Id. at 481. As such, federal defendants
read into Boesche the Supreme Court’s blessing to the Secretary’s broad lease-cancellation
authority, at lease for pre-lease errors.

Plaintiff l\/loncrief, on the other hand, would limit Boesche, 373 U.S. at 485, to its

facts, pointing to the Supreme Court’s language at the end ofthe opinion:

We sanction no broader rule tha[n] is called for by the exigencies of the general

situation and the circumstances of this particular case. We hold only that the

Secretary has the power to correct administrative errors of the sort involved here by

cancellation of leases in proceedings timely instituted by competing applicants for

the same land.
[d. l\/loncrief argues that the Secretary’s administrative cancellation authority is limited,
not absolute, and is restricted by Congress to “only three circumstances”:

(1) Where a lease is in violation of the l\/ILA itself, lnterior may institute judicial
proceedings in district court. 30 U.S.C. § 184(h)(1), (h)(2) unless the leaseholder
is a bona fide purchaser;

(2) Where a lessee on a producing lease has violated the statute, regulations, or
terms ofthe lease itself, lnterior may also institute proceedings in federal district
court. ]d. § l88(a);

(3) Where a lessee on a non-producing lease has violated the lease provisions,
lnterior may administratively cancel a non-producing lease after 30-days notice.
Id. § 188(b).

Pl.’s Mot. at 3.

Not surprisingly, this dispute over the scope of the Secretary’s authority to cancel

leases through the administrative, rather than judicial, process, is not limited to the

10

circumstances of this case and has never been squarely resolved by our Circuit.4 To be
sure, “administrative agencies are assumed to possess at least some inherent authority to
revisit their prior decisions, at least if done in a timely fashion.” lvy Sports Med., LLC v.
Barwell, 767 F.3d 81, 86 (D.C. Cir. 2014). But at the same time, “Congress. . .undoubtedly
can limit an agency’s discretion to reverse itself” with statutory language ]d. (quoting
New Jersey v. EPA, 517 F.3d 574, 583 (D.C. Cir. 2008)). 5

But thankfully, 1 need not resolve such a broad-sweeping question here because this
case can be resolved on other grounds. For purposes ofmy analysis, 1 will assume that the
Secretary does in fact have the statutory authority to administratively cancel leases under
the circumstances presented in this case. Yet, even assuming that authority, the Secretary’s

action cannot be “arbitrary, capricious, an abuse of discretion, or otherwise not in

 

leat cf Sl'lver State Land, LLCv. Schez`der, 843 F.3d 982, 990 (D.C. Cir. 2016) (upholding
the Secretary’s authority to terminate a land sale before the land patent was issued
observing in dicta that the Supreme Court has condoned the authority to cancel a patent
post-issuance as well).

5 Lower courts remain split on whether or not Congress has indeed limited the scope of the
Secretary’s authority under the l\/lLA. Conapare Grz`jj‘in & Grz'jj”l`n Expl., LLC v. Unz`tea’
States, 116 Fed. Cl. 163, 176 (2014) (“The Secretary of the lnterior has the authority to
cancel any oil and gas lease issued in violation of the Mineral Leasing Act and
implementing regulations or for administrative errors committed prior to the issuance of
the lease.”) and Grynl)erg v. Ke)nplhorne, No. 06-cv-01878, 2008 WL 2445564, at *4 (D.
Colo. June 16, 2008) (“[1]n Boesclie [], the Supreme Court confirmed that the Secretary's
‘general powers of management over the public lands’ gives him ‘authority to cancel [a]
lease administratively for invalidity at its inception.”’) (internal citation omitted) with
Doaglas Tl`/nber Operalors, ]nc. v. Salazar, 774 F. Supp. 2d 245 (D.D.C. 2011) (Bates, .l.)
(Noting that “[Boescne ’s`] ruling was expressly limited to ‘the exigencies of the general
situation and the circumstances of this particular case’ and noted that judicial safeguards
were in place to ‘not open the door to administrative abuses.”’) (internal citation omitted).

ll

accordance with law.” 5 U.S.C. § 706(2)(A); Re)npfer v. Snar]fstein, 583 F.3d 860, 865
(D.C. Cir. 2009) (courts must determine “whether the agency acted arbitrarily or
capriciously”). Unfortunately for the defendants it was here.

II. The Secretary’s Decision to Cancel the Moncrief Lease Was Arbitrary
and Capricious

An' agency action is “arbitrary and capricious if the agency has relied on factors
which Congress has not intended it to consider, entirely failed to consider an important
aspect of the problem, [or] offered an explanation for its decision that runs counter to the
evidence before the agency.” Slate Far/n, 463 U.S. at 43. “'l"he scope of review under the
‘arbitrary and capricious’ standard is narrow and a court is not to substitute its judgment
for that of the agency.” ld. “ln other words, the question is not what [the Court] would
have done, nor whether [the _Court] agree[s] with the agency action,” but “whether the
agency action was reasonable and reasonably explained.” A/ns. for Clean Energy v. EPA,
864 F.3d 691, 726 (D.C. Cir. 2017) (internal quotation marks omitted). As l previously
noted in my order granting partial SJ to Solenex for the 30-year suspension of its lease,
Courts in our Circuit have long-held that unreasonable agency delay violates the APA.
See Order Granting Partial Summary Judgment to Solenex LLP, Solenex v. Jewell, 156 F.
Supp. 3d 83, 84 (D.D.C. 2015) (quoting Nader v. F.C.C., 520 F.2d 182, 206 (D.C. Cir.
1975)) (“[t]here comes a point when relegating issues to proceedings that go on without
conclusion in any kind of reasonable time frame is tantamount to refusing to address the

issues at all and the result is a denial ofjustice”).6 The reasonableness of an agency

 

6 lndeed, “federal courts are generally less likely to accord an agency the inherent power

12

rescission ofa leaseholder’s right must thus bejudged in light of the time that has elapsed
and the resulting reliance interests at stake. Even if agencies have the power to rescind
decisions made by their predecessors, they must still exercise that power within a
reasonable amount oftime. An unreasonable amount of time to correct an alleged agency
error, where the record shows that error was readily discoverable from the beginning,
violates the APA. See, e.g., Prieto v. UnitedStates, 655 F. Supp. 1187, 1191 (D.D.C. 1987)
(fmding that agency rescission of trust status to an lndian land grant after nine months was
arbitrary and capricious); see also A)n. Wild Horse Pres. Ca/npaign, 873 F.3d at 928
(finding that agency rescission of wild horse territory designation after twenty years
without explanation was arbitrary and capricious). Here, 1 find that the Secretary’s
“eleventh-hour interpretation of his duty is owed no great degree ofdeference.” Texas Oil
and Gas Corp v. Watt, 683 F.2d 427, 431 (D.C. Cir. 1982).

ln Watt, our Circuit Court reversed the district court’s approval ofthe Secretary’s
decision to cancel leases issued on military lands, reasoning that the cancellation was
arbitrary and capricious ld. The court ruled that the Secretary could not rescind the leases
based on newly-discovered violations ofa later-in-time law passed by Congress. ld. While
the issue in Walt was the Secretary’s mistaken beliefthat he was required to cancel for pre-
lease errors, rather than permitted to do so as defendants argue here, the circumstances are
similar insofar as the court refused to sanction “a retroactive exercise of discretion to which

it is impossible to ascribe any rational purpose.” Id. at 434. ln particular, our Circuit Court

 

to reconsider. . .when the agency has not reconsidered its decision within a reasonable time
period...” Daniel Bress,Adniinistrative Reconsideration, 91 Va. L. Rev. 1737, 1748 (2005).

13

emphasized the reliance interests at stake, observing that:
“Persons affected by statutes implemented by agency discretion would not know
where to look to determine when and to what extent the status quo had been
altered. And we cannot allow an agency to ignore a statutory amendment for a
time and later claim, as here, that regulations based on the unamended statute
render void any actions taken in accordance with the clear language of the
amended statute. An agency possessed of discretion may exercise it or not; but
it may not exercise it and then take back its action on the ground that, based on
the duty to adhere to its own regulations irrespective of what the statute says, it
lacked the discretion in the first place."

[d. at 433-34.

Similarly here, federal defendants’ exercise of authority to cancel Moncrief`s lease
for pre-lease errors was arbitrary and capricious because of the failure to consider the
substantial reliance interests at play. For nearly a decade, l\/loncrief, along with other
leaseholders, received letters from the Secretary suspending their leases under the
understanding that lnterior was considering the area for wilderness designation See, e.g.,
Letters Suspending 1\/loncrief Lease, J.A. Vol. l at 51~65 (BLl\/l-l\/l000717~737). They
received no notice of any supposed violation lt was not until 2002 that lnterior began
consultation with the Blackfeet Nation under Section 106 of the NHPA. See 1/31/02
Determination ofTCD Eligibility Notification, .l.A. Vol. lV at 201 (F8005942). Even then,
leaseholders received no notice that their leases might be subject to cancellation
Defendants cannot hide behind the consultation process as a fair notice to leaseholders that
something might be amiss with their leases. The agency’s own delinquency in reaching a
resolution does not diminish the reliance interests of`leaseholders who had been waiting on

that resolution for more than thirty years. Thus, 1 find that federal defendants’ failure to

consider those interests was arbitrary and capricious in violation of the APA. 5 U.S.C. §

14

706(2)<A>.7

IlI. Even Assuming lnterior Had Authority to Cancel the Lease, Plaintiff
Moncrief Is a Bona Fide Purchaser Within the lVleaning of the APA

The arbitrary cancellation of Moncriefs lease, without notice, also violates his
rights a hona_/ide purchaser under the l\/lLA, 30 U.S.C. § 184(h)(2)_; 43 C.F.R. § 3108.4,
because Plaintiff l\/[oncrief “[1] acquired his interest in good faith, [2] for valuable
consideration, and [3:| without notice of the [alleged] violation,” Sw. Petroleu/n Corp. v.
Udall, 361 F.2d 650, 656 (10th Cir. 1966).

Defendants claim that only a violation of the l\/lLA itself, not violations of NEPA,
NHPA, or other statutes, warrants honafide purchaser protection Defs.’ l\/lot. at 20. But
that argument is entirely circular! Defendants cannot at once argue that a violation of

NEPA and NHPA renders a lease “subject to cancellation” under its regulations, see 43

 

7 l also note that defendants apparently ignored the discretion with which agencies apply
procedural statutes like NEPA and NHPA as part of the consultation process. See, e.g.,
Winter v. Natural Resources Defense Council, lnc., 555 U.S. 7, 24 (2008) (noting that the
issuance of a detailed, 293-page EA served the same purpose as an EIS oftaking a “hard
look at environmental consequences”); Myersville Citizens/`or a Rural Cnuy., [nc. v.
F.E.R.C., 783 F.3d 1301, 1322-26 (D.C. Cir. 2015) (upholding “[the] Commission's
consideration of the [proposed] alternative in its Environmental Assessment [as]
adequate”); Duncan ’s Point Lot Owners Ass ’n [nc., 522 F.3d at 377 (noting that our
Circuit “has upheld agency determinations not to prepare an ElS” in several instances)_;
City ofGrapevine, Tex. v. Dep’t ofTransp., 17 F.3d 1502, 1509 (D.C. Cir. 1994) (finding
no violation of the NHPA where agency approved a project before consulting with the
ACHPA because the project “was expressly conditioned upon completion of the § 106
process”). However, l need make no finding on whether there was in fact compliance
with NEPA or NHPA. Regardless ofthe lawfulness of the lease’s issuance thirty years
ago, the agency’s rescission of the lease must still comply with the APA. See, e.g., A/n.
Wild Horse Pres. Ca)npaign, 873 F.3d at 928 (“we cannot condone the correction ofone
error by the commitment of another”) (quoting Gray v. Mississippi, 481 U.S. 648, 663
(1987)) (internal quotation marks omitted).

15

C.F.R. §3108.3(d), and at the same time deprive plaintiffofthe the exception in those same
regulations prohibiting cancellation “to the extent that such an action adversely affects the
title or interest ofa hona_fide purchaser.” 43 C.F.R. § 3108.4. That is too clever by half.
Neither a literal, nor a logical, reading of the agency’s regulations could support such a
result.

Plaintiffl\/loncriefeasily qualifies for bona fide purchaser status because he tendered
valuable consideration to his predecessor-in-interest, ARCO. See MoncriefDecl. [Dkt. #
19-2] 11 2. There is no evidence that he did not acquire his interest in good faith. And as
for notice, notice of continued suspensions while an ElS was conducted on APDs on other
leases is hardly notice that his lease was void for the reasons already outlined above.
lndeed, l\/loncrief`s predecessor, ARCO, requested the suspension on the understanding
that it would “terminate upon completion of the Environmental lmpact Statement for [the]
pending application[s].” see 6/1/88 DOl Letter to ARCO, J.A. Vol. l at 68 (BLl\/[-
1\/1000746); Pl.’s l\/lot. at 11. And the suggestion ofvoidness is further rebutted by lnterior’s
failure to cancel the lease to remedy the supposed violation for more than thirty years.

Because 1 find a violation of the APA on the grounds above, l need not reach
Moncrief`s additional arguments that the Secretary’s cancellation violated his due process
rights and was time barred by the statute of limitations

CONCLUSION

For the reasons outlined above, l find that federal defendants’ decision to cancel the

1\/loncrief lease was arbitrary and capricious '1`hus, for all of the reasons outlined in this

Opinion, plaintiffs Motion for Summary Judgment [Dkt. #19] is GRANTED, defendants’

16

Cross-Motion for Summary Judgment [Dkt. #21] and defendant-intervenor’s Cross-
Motion for Summary Judgment [Dkt. #24] are DENIED, and this case is remanded to the

Department of lnterior with the order that the Moncrief lease be REINSTATED.

 

 

United States District Judge

17

