UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SoLENEX LLC, )
)
Plainriff, )
) .
v. ) Civil Case No. 13-0993 (RJL)
)
SALLY JEWELL et al., )
) FILED
Defendants. )
) sEP 2 h 2018
C| k,U.S. Dl t` t&B kru tcy
MEMOI!ANDUM OPIN10N wills torthe%!;inm?%.,¢.,¥,.m

 

(Septernbelq, 2018) [Dkts ## 89, 93]

Plaintiff Solenex LLC (“Solenex”), the holder of a federal oil and gas lease in
Montana, brings suit against the Secretary of the lnterior, the Secretary of Agriculture, the
Director of the Bureau of Land Management, the Chief of the Forest Service, and several
other subordinate federal officials (collectively, “federal defendants” or “the Government”)
relating to the Government’s cancellation of its lease after suspending all oil and gas
drilling and extraction activity on that lease for more than thirty years. See First Arnend.
Cornpl. [Dl<t. # 73] 1|1] 3-13, 99-115. 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 etseq. See First Amend. Cornpl. 111[ ll6-l58. Before this Court are the parties’ Cross-
Motions for Summary Judgment. See Pl.’s Motion for Summary ]udgment [Dkt. #89]

(“Pl.’s Mot.”); Defs.’ Cross-Motion for Summary Judgrnent [Dkt. # 93] (“Defs.’ Mot.”).

For the following reasons, the Court GRAN'l"S the plaintiffs motion for summary
judgment and DENIES the defendant’s cross-motion for summary judgment.
BACKGROUND

I. Regulatory Landscape

Plaintiff Solenex seeks declaratory and injunctive relief for federal defendants’
alleged violations ofthe Administrative Procedure Act (“APA”), 5 U.S.C. § 55l et Sec/., by
cancelling the Solenex lease after holding it in suspension for more than thirty years.
Plaintiff raises several independent reasons for finding that federal defendants acted
unlawfully: (l) federal defendants lack authority to cancel the lease both because the
Secretary exceeded his authority and because his cancellation Was arbitrary and capricious,
(2) the cancellation is time barred by a statutory limitations period or, alternatively, the
doctrine of laches, (3) defendants are estopped from cancelling the lease by a pattern of
conduct treating the lease as valid, and (4) the lease vvas properly issued in compliance
With NEPA and the NHPA. A brief overview of these is in order.

First, plaintiff argues that the Department of lnterior’s (“Interior”) authority to
administratively cancel a lease is limited under the l\/lineral Leasing Act of 1920 (“l\/lLA”).
30 U.S.C. §§ 181~287. The l\/lLA governs the Secretary of lnterior’s (hereinafter “the
Secretary”) authority to issue leases for “[a]ll lands subject to disposition under this Act
Which are known or believed to contain oil or gas deposits.” Ia’. § 226(a). Pursuant to the
l\/ILA, the Secretary may also cancel those leases if the lease is (l) “in violation of the
MLA, unless the current leaseholder is a bona fide purchaser,” z`a’. § l84(h)(l), (h)(2); (2)
“When a lessee has violated the statute, regulations, or the lease itself, id. § lSS(_a); or (3)

2

“where the lessee is in violation of lease provisions after at least 30-days’ notice” and the
lease is a non-producing lease, id. § lSS(b). lnterior has also promulgated its own
regulations allowing for administrative cancellation of leases under certain conditions See
43 C.F.R. § 3 l08.5. Namely, that the Secretary can cancel leases for either (l) the lessee’s
failure “to comply with any of the provisions of the 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 the lease was “improperly issued.” [d. § 3l08.3(d).

As asserted by federal defendants, one of the ways in which a lease can be
“improperly issued” and therefore subject to administrative cancellation is by non-
compliance with either the National Environmental Policy Act (“NEPA”) or the National
Historic Preservation Act (“NHPA”). Defs.’ l\/lot. at 27¢29. NEPA requires that agencies
take a “hard look” at the environmental consequences, RO/)erlson v. Mel'/iow Valley
Citl`ze)is Cou)ici'l, 490 U.S. 332, 350 (1989), of“major Federal actions” that “significantly
affect [] the quality ofthe human environment.” 42 U.S.C. § 4332(C); 40 C.F.R. §§ l50.3,
l501.4(c).l Nevertheless, an “agency is not constrained by NEPA from deciding that other
values outweigh the environmental costs.” Robe)”tson, 490 U.S. at 350. NHPA, for its part,

requires that the agency “take into account the effect of [:an] undertaking on any historic

 

l As our Circuit has held, “NEPA's requirements vary based on the type of agency action
in question ” Cz`ly OfP/ioenix, Arizona v. Huerta, 869 F.3d 963, 971 (D.C. Cir. 2017),
Opz`m`on amended 011 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
statement” and that “[a]ctions with impacts that are not significant or are unknown require
a briefer environmental assessment.” [a’. at 971-72.

property.” 54 U.S.C. §§ 300308, 306108. This requires that the agency consult with the
Advisory Council of Historic Preservation (“ACHP”). See id. NHPA 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. Dimccm ’S Poz`nr LOI Owners Ass’n Inc. v. F.E.R.C., 522 F.3d 37l, 377
(D.C. Cir. 2008); Cf Nat’[ Pa)”ks C()nse/”vation Ass’)/z v. Um'ted Smles, l77 F. Supp. 3d l
(D.D.C. 2016) (permitting mineral development in a designated NHPA historic district
after the Forest Service conducted an environmental assessment but not a full-blown
environmental impact statement). lmportantly, while both of these statutes require
agencies to follow certain procedures to gather information to help assist with decision-
making, they do not themselves impose substantive requirements with respect to the
outcome of that decision-makingl See, e.g., Sierm Club v. Federal Energy Regulatory
COmmz`Ssz`On, 867 F.3d l357, l367 (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); id. (“[NEPA] is primarily inforination-
forcing”); Delaware Rl`ve/”keeper Network v. F.E.R.C., 753 F.3d l304, 1310 (D.C. Cir.
2014) (“NEPA is ‘essentially procedural’ and designed to ensure ‘fully informed and well-
considered decision[s]’ by federal agencies) (_quoting VI. Ya)i/cee Nuclear Power Corp. vt
NRDC, 435 U.S. 5l9, 558 (l978)); Nal ’le‘m'//ig Ass ’rz 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 of their undertakings.”) (internal citation omitted).

4

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.” MOto)” Ve/zl`cle Mf/”s. Ass’n Oflhe Um`led Slales, [iic. v. Stal'e Farm Mut. Aul‘o. [ris.
C0. (“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 E)/zcl`no Motorccirs, LLC v. Navaw”c), 136 S. Ct.
21 17, 2126 (2016) (“‘Unexplained inconsistency’ in agency policy is ‘a reason for holding
an interpretation to be an arbitrary and capricious change from agency practice. ..”’); Am.
Wl`ld Horse Pres. Campczign v. Pem'ue, 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."`). lt is through this lens that 1 view the
Bureau of Land l\/lanagement’s relatively recent decision to cancel the Solenex lease for
purported pre-lease violations ofNEPA and NHPA after holding it in suspension for over
three decades!

II. Procedural History

The circumstances underlying this ease date back to 1\/[ay 24, 1982, when the Bureau
ofLand Management (“BLl\/l”) approved federal oil and gas Lease 1\/1-53323 to Solenex’s

predecessor, Sidney l\/l. Longwell (“Longwell”). See Statement of Material Facts in

Support of Pls.’ Mot. for Summary Judgment (“PSOF”)2 1111 11-21. BLl\/[ issued the lease
after conducting a 165-page Environmental Assessment (“1981 EA”) covering nearly 200
pending leases in the Badger Two l\/ledicine (“Badger-Two”) area ofthe Lewis and Clark
National Forest in cooperation with the United States Forest Service (“Forest Service”).
Icz'. 1111 149. The 1981 EA considered the effects on the environment of various alternatives
to leasing, including “no action” alternatives See i`d. 1111 4, 5. ln addition to the EA, the
Forest Service also engaged in American lndian Religious Freedom Act consultation with
the Blackfeet 'fribe. [d. 11 4. Ultimately, the Forest Service issued a Deeision Notice
(“DN”) and Finding of No Significant lmpaet (“FONSI”), i`d. 11 6, approving “Alternative
3” which conditionally granted leases “with surface occupancy. .'.only for accessible areas
that could be protected” and provided that “[a]fter lease issuance, any proposed oil and gas
activities would be fully analyzed under NEPA.” ]a’. 11 5.

Longwell subsequently assigned his lease to a company called Fina in June 1983.
Id. ln November ofthat year, Fina submitted an Application for Permit to Drill (“APD”)
an exploratory well to BLl\/I. [a’. Two years later, after considering the adverse
environmental effects of approving the APD, the Forest Service issued a 318-page EA
(“1985 EA”) evaluating and ultimately approving it. ]d. 11 30. The 1985 EA expressly
incorporated the earlier 1981 EA approving the lease itself. Tlie 1985 EA also documented

consultation with other agencies required by law, id. 11 29, and with the Blackfeet Tribe.

 

2 Plaintiffs Statement of l\/laterial Facts (“PSOF”) cites to the Administrative Record
(“AR”) 1Dkt. #45]. For ease ofcitation, the paragraphs cited in this opinion are the
relevant paragraphs in PSOF that contain undisputed facts supported by documents in the
administrative reeord.

See z`a'. 1130. '1`lie1"orest Service expressly found that the APD would not affect the Tribe’s
reserved rights in the ceded strip and that “1n10 religious sites or activities were identified
in the project area.‘ . .” Id. On an administrative appeal, the lBLA upheld the approval but
remanded for further consideration of four issues la'. 1111 31-32. Despite the approval of
the Fina APD, in 1993 BLl\/l suspended the lease for further environmental assessments
la’. BLl\/l then suspended the lease every year after that for nearly twenty years Ia’.

Solenex brought this suit in 2013 against the Secretary ofthe lnterior, the Secretary
of Agriculture, the Director of the Bureau of Land l\/[anagement, the Chief of the Forest
Service, and several other subordinate federal officials relating to the suspension ofall oil
and gas drilling and extraction activity on that lease. See generally First Amend. Compl.
[Dkt. # 1]. On July 27, 2015, this Court partially granted Solenex’s motion for summary
judgment on federal defendants’ suspension of its lease, finding that dcfendants’ 29-year
delay in reviewing the suspended lease constituted unreasonable delay under the APA. See
7/27/15 Order Granting Partial Summary .ludgment to Solenex LLP (_“7/27/15 Order”)
1Dkt. #521. Accordingly, 1 ordered defendants to submit, within 21 days, a “proposed
accelerated sehedule” ofthe remaining tasks to be completed in the administrative process
Ia’. at 5.

On August 17, 2015, defendants submitted a proposed schedule, see Defs.’
Response to Ordcr of the Court (“Defs.’ Response”) [Dkt. # 53], that 1 found deficient in
several respects, including that: (1) it proposed that defendants have until .luly 15, 2017 to
complete compliance under NEPA and lift the suspension on the lease; and (2) it lacked
any explanation as to why this much time is necessary to determine whether~al"ter 33

7

years and four APD approvals_the lease was “improperly issued” under 43 C.F.R. §
3108.3(d). See 10/8/15 1\/lem. Order 1Dkt. # 571 at 3; see also Transcript of 10/6/15
Proceeding 1_Dkt. # 561. As such, 1 rejected defendants’ proposal as unreasonable and
subsequently ordered defendants to determine by November 23, 2015 whether to initiate
the process for cancellation of the Solenex lease. See 10/8/15 Mem. Order at 3.

ln November of 2015, defendants informed me that they had decided to initiate the
process for cancellation of`plaintiffs lease. See Defs.’ Notice of Response 1Dkt. # 58:|.
After a period initially agreed to, where the case was stayed pending settlement discussions
see Joint 1\/lotion to Stay All Proceedings 1Dkt. # 59], the defendants finalized their
cancellation of the lease on 1\/larch 17, 2016. See generally Defs.’ Notice ofCancellation
1Dkt. # 681. As a basis for cancelling the lease, defendants concluded that the original
Solenex lease, as well as other leases issued in the Badger-Two Medicine area,3 were issued
in violation ofNEPA and the NHPA. Ia’. at 13. Thus, l now must review the lawfulness
of defendants’ cancellation of the Solenex lease.

Analysis

I. The Court Need Not Resolve Whether B()esc/ze 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.” Fed. R. Civ. P. 56(a). Because this case challenges a final agency action under the

 

3 Also before this court is a challenge to the Secretary’s cancellation ofthe lease previously
held by plaintiffW.A. 1\/loncrief. See W.A. Moncrl`ef`v. Department aflnterior et al., Civil
Case No. 17-cv-609 (D.D.C.).

APA_thc termination 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 1on facts that] have some basis in the record,
and considered the relevant factors.” Fana’for Ani/nals v. Bal)l)z`tt, 903 F. Supp. 96, 105
(D.D.C. 1995). Here, 1 consider whether the Department oflnterior, through the Secretary,
acted reasonably in cancelling the Solenex lease after more than thirty years for an alleged
pre-lease error.

As a preliminary matter, the parties disagree on the legal basis and scope of the
Secretary’s authority to administratively cancel leases Defendants argue that 43 U.S.C. §
2 authorizes the Secretary to “perform...all executive duties...in anywise respecting
...public lands,” including to “correct [an] error 11” of her predecessor. See Defs.’ 1\/lot. at
23 (quoting Boesche v. Ua’all, 373 U.S. 472, 478 (1963)). ln other words defendants
argue, the Secretary has the inherent authority to administratively cancel leases
Defendants base this argument on the Supreme Court’s decision in Boesche to uphold the
Secretary’s cancellation of a lease that was “defeetive because it failed to include an
adjoining 40-acre tract under application by another party.” ]cl. at 484. Reviewing the
legislative history of the l\/lLA, the Boesclze court observed that “[i:|t would thus be
surprising to find in the Act, which was intended to expand, not contract, the Secretary's
control over the mineral lands ofthe United States, a restriction on the Secretary's power
to cancel leases issued through administrative error_a power which was then already

firmly established.” [a’. at 481. As such, defendants read into Boescne a recognition by the

Supreme Court of the Secretary’s broad lease-cancellation authority, at lease for pre-lease
errors

Plaintiff, on the other hand, argues that the 1\/1LA does not grant such broad
cancellation authority, see Pl.’s Mot. at 9, nor does Boesche sanction the authority to
“cancel a lease for alleged mistakes made by the BLl\/l decades earlier.” ]a’. at 14. Plaintiff
represents that the Secretary in Boesc/ze argued only for the “authority to forfeit or cancel
leases for violations occurring after lease issuance,” not for pre-lease violations Ia’. at 15.
And the Secretary’s post-lease cancellation authority, plaintiff maintains would still
require that the Secretary institute ajudicial proceeding for lease cancellation pursuant to
30 U.S.C. § 188(a) rather than cancel the lease administratively Ia’.

Not surprisingly, this topic has been both debated in lower courts across the
country, 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.” Ivy Sports Mea’., 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 lcl. (quoting New Jersey v.

EPA, 517 1"`.3d 574, 583 (D.C. Cir. 2008)). 5 Thankfully, 1 need not resolve the scope of

 

4 Bat cjf. Silver State Land, LLC v. Schei`a’er, 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 had 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 1\/1LA. Co)npare Grz`]jfzn & Gri`ffin Expl., LLC v. Unz`tea’
States, 116 Fed. Cl. 163, 176 (2014) (“'l`he Secretary of the lnterior has the authority to
cancel any oil and gas lease issued in violation of the l\/lineral Leasing Act and

10

the Secretary’s authority here because this case turns on its unique facts And the
undisputed facts are these: the Secretary oflnterior canceled Solenex’s lease after 33 years
without notice and based on a supposed pre-lease violation ofNEPA and NHPA which had
never been disclosed to Solenex as a leaseholder. Additionally, the Secretary cancelled
Solenex’s 27-year old APD after twice approving it and similarly giving no indication that
the underlying lease was invalid. As such, even assuming the authority to administratively
cancel leases the failure to consider the reliance interests at stake in cancelling plaintiffs
lease and the accompanying APD after three decades is “arbitrary, capricious an abuse of
discretion, or otherwise not in accordance with law” under the APA for all of the reasons
below. 5 U.S.C. § 706(2)(A); Re/npfer v. Slzar}fstein, 583 F.3d 860, 865 (D.C. Cir. 2009)
(courts must review “whether the agency acted arbitrarily or capriciously”).

lll. The Secretary’S Decision to Cancel the Solenex 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, 1or_1 offered an explanation for its decision that runs counter to the

 

implementing regulations or for administrative errors committed prior to the issuance of
the lease.”) ana’ Grynl)erg v. Ke/npt/aorne, No. 06-cv-01878, 2008 WL 2445564, at *4 (D.
Colo. June 16, 2008) (“111n Boescne 11, 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
Douglas Tz`rnber Operators, lnc. v. Salazar, 774 F. Supp. 2d 245 (D.D.C. 2011) (Bates .1.)
(Noting that “[Boesclze’$] 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).

11

evidence before the agency.” State Far)n, 463 U.S. at 43. “The 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.” Ia’. “ln other words the question is not what [the Court] would
have done, nor whether 1the 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).

The reasonableness of an agency’s decision to rescind a lease must be judged in
light of the time that has elapsed and the resulting reliance interests at stake.6 As 1
previously noted in my order granting partial summary judgment 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 7/27/15 Order at 3 (quoting Naa’er v. F.C.C., 520 F.2d 182,
206 (D.C. Cir. 1975)) (“1t1here 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 o'fjustice”). The same logic applies here.
Even if agencies have the power to rescind decisions made by their predecessors they must
still exercise that power within a reasonable amount of time. An unreasonable amount of
time to correct an alleged agency error, especially where the record shows that error was

readily discoverable from the beginning violates the APA. Here, 1 find that the Secretary’s

 

6 lndeed, “federal courts are generally less likely to accord an agency the inherent power
to reconsider. . .when the agency has not reconsidered its decision within a reasonable time
period...”Daniel BressAcl)ni'ni'strative Reconsicleratz`on, 91 Va. L. Rev. 1737, 1748 (2005).

12

"eleventh-hour interpretation of his duty is owed no great degree of def`erence.” Texas Oil
and Gas Corp v. Watt, 683 F.2d 427, 431 (D.C. Cir. 1982).

ln Watt, our Circuit reversed the district court’s approval of the Secretary of
lnterior’s decision to cancel leases issued on military lands reasoning that the cancellation
was arbitrary and capricious Id. The court reasoned that the Secretary could not rescind
the leases based on newly-discovered violations ofa later-in-time law passed by Congress
[d. While the issue in Watt was the Secretary’s mistaken belief that he was required to
cancel the lease 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.” [d. at 434.
ln particular, our Circuit 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.

As 1 noted in my previous order granting partial judgment to Solenex for the multi-
decade suspension of its lease, “1 could not find a single example where agency action was
as egregiously delayed as the 29 years at issue here.” See 7/27/15 Order at 3 n.l. Agency
delay ofcourse has a practical effect: it creates reliance interests This is particularly true

in the context of agency reconsideration of its decision to grant plaintiff certain interests

13

and “such reconsideration must be timely.” Prieto v. United States, 655 F. Supp. 1187,
1191 (D.D.C. 1987) ('finding 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).

ln Prieto, the district court considered the rescission of a land grant after nine
months under both APA and estoppel claims The Court found that the agency action was
unreasonable under both legal theories: (l) the agency “abused its discretion and acted
arbitrarily and capriciously in upholding the revocation of plaintiffs trust status,” and (2)
“the Department oflnterior is estopped by its own conduct from revoking this trust status.”
Id. at 1188.7

Here, federal defendants not only failed to consider the reliance interests at stake,
they dismissed them out of hand. Federal defendants appear to argue that no time-period,
however long, would prove too attenuated to reconsider the issuance of`a lease under newly
discovered legal theories Defs.’ l\/lot. at 7-9. Horsefeathers! Even putting aside the thirty

years defendants supposedly spent trying to discover the lawfulness or unlawfulness of

 

7 ln viewing the estoppel argument, the Prieto court found that plaintiff had met the six-
eleinent test necessary for a Government estoppel claim by demonstrating that agency error
in issuing the land grant had created reliance interests that prevented the Department of
lnterior from revoking the trust status ofthe land after nine months ld. at 1188-95. As
the court put it, “|:w]hether it is asserted against a private party or the government, the
essence of equitable estoppel is fairness ln the instant case...the Department of lnterior
has dealt far less than fairly with plaintiff.” Id. at 1195. While 1 need not reach plaintiffs
estoppel argument here, this case certainly presents similar concerns with the basic fairness
which citizens should expect from federal agencies

14

their own actions this “wait and see” approach_tliough convenient from a policy
perspective_wreaks havoc on the interests ofindividual leaseliolders. “ln administrative
law, as elsewhere, two wrongs do not make a right.” A)n Wild Horse Pres. Ca)npaign, 873
F.3d at 928. As such, the defendants’ failure here to consider plaintiffs reliance interests
constituted “arbitrary and capricious” agency action.8

Moreover, the Secretary’s cancellation of Solenex’s lease, without notice, is
precisely the sort of action which “undermine[es] the Government’s credibility at the
bargaining table and increase[es] the cost of its engagements.” United States v. Winstar
Corp., 518 U.S. 839, 884 (1996) (plurality opinion). As plaintiff notes it is well-
established that the federal government, when it executes an oil and gas lease under the

l\/lLA, enters into a contract which is governed by the same “basic contract principles” as

 

8 1 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, [nc., 555 U.S. 7, 24 (2008) (noting that the
issuance ofa detailed, 293-page EA served the same purpose as an ElS of taking a “hard
look at environmental consequences”); Myersville Citizens for a Rural Crnty., [nc. v.
F.E.R.C., 783 F.3d 1301, 1322-26 (D.C. Cir. 2015) (upholding “1the1 Commission's
consideration of the 1proposed] alternative in its Environmental Assessment 1as1
adequate”); Duncan ’s Point, 522 F.3d at 377 (noting that our Circuit “has upheld agency
determinations not to prepare an EIS” in several instances); City ofGrapevine, Tex. v. Dep't
ofTransp., 17 F.3d 1502, 1509 (D.C. Cir. 1994) (finding no violation ofthe NHPA where
agency approved a project before consulting with the ACHPA because the project “was
expressly conditioned upon completion of the § 106 process”). However, 1 need make no
finding on whether there was in fact compliance with NEPA or NHPA. Regardless of the
lawfulness ofthe lease’s issuance thirty years ago, the agency’s rescission ofthe 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 of one error by the commitment of another”) (quoting
Gray v. Mississippi, 481 U.S. 648, 663 (1987)) (internal quotation marks omitted).

15

private contracting parties Mobil Oil Expl. & Producing Se., Inc. v. United States, 530
U.S. 604, 607, 609 (2000). As such, the Government’s contractual duties “are governed
generally by the law applicable to contracts between private individuals.” Id. at 607; see
also Franconia Assocs. v. United States 536 U.S. 129, 141 (2002). The Government’s
fulfillment of its contractual duties requires it to act in good faith. lt did not do so here!

Because 1 find a violation of the APA on the grounds above, 1 need not reach
Solenex’s additional arguments that the Secretary’s cancellation was equitably estopped or
was time barred by the statute of limitations 1 also need not reach the issue of whether
Solenex was a bona fide purchaser for purposes of protection under the MLA.

CONCLUSION

For the reasons outlined in this opinion, 1 find that defendants’ decision to cancel
the Solenex lease was arbitrary and capricious Thus, for all of the reasons outlined in this
opinion, plaintiffs Motion for Summary Judgment [Dkt. # 89] is GRANTED, defendants’
Cross-l\/lotion for Summary Judgment [Dkt. # 93] is DENIED, and this case is remanded

to the Department of Interior with the order that the Solenex lease be reinstated.

”.Zi~»@t~a

RICHARD .LE N
United States `i riot Judge

16

