MAYER, BROWN & PLATT
SUPREME COURT DOCKET REPORT
1998 Term, Number 8 / January 25, 1999
On Friday, January 22, the Supreme Court granted certiorari in
one case of potential interest to the business community. Under the slightly
expedited briefing schedule ordered by the Court, amicus briefs in support of
the petitioners are due on March 5, 1999, and amicus briefs in support of the
respondents are due on April 2. Any questions about this case should be directed
to Alan Untereiner (202-778-0656) or Donald Falk (202-778-0174) in our
Deference To Informal Agency Interpretations — Reservation
of Mineral Rights — Federal Land Grants.
The Court granted certiorari in Amoco Production Co. v.
Southern Ute Indian Tribe, No. 98-830, to determine whether a statutory
reservation of "coal" to the United States made in the Coal Lands Acts of 1909
and 1910 also reserved coal bed methane ("CBM"), a gaseous substance contained
in coal formations. In deciding that question, the Court is likely to resolve a
longstanding conflict in the circuits over whether agency interpretations not
embodied in legislative rules or agency adjudications are entitled to deference
under Chevron U.S.A. Inc. v. Natural Resources Defense Council,
467 U.S. 837 (1984).
In 1906, President Theodore Roosevelt withdrew from all forms
of entry approximately 65 million acres of public lands considered valuable for
their coal resources, including lands that had been ceded to the United States
by the Southern Ute Indian Tribe during the last quarter of the Nineteenth
Century. In response, Congress passed the Coal Lands Acts of 1909 and 1910 — the
former to ensure that homesteaders already occupying those lands in good faith
were not disenfranchised and the latter to ensure the continued development of
the public lands by new homesteaders. Each of the Acts expressly reserved to the
United States all "coal" in lands to which the Acts applied. In 1938, pursuant
to the Indian Reorganization Act of 1934, the Secretary of the Interior
transferred to the Southern Ute Tribe equitable title to the coal held by the
United States on 200,000 acres of public land that once had been part of the
Southern Ute reservation. Private persons, however, retained ownership of the
non-coal portions of those lands.
Such was the status of the ownership interests on these lands
in 1991, when the Southern Ute Tribe filed suit in the United States District
Court for the District of Colorado against Amoco Production Company, other oil
companies, and individuals who claimed various ownership interests in CBM gas
contained in the coal strata to which the Tribe holds equitable title.
Specifically, many non-Indian land owners had been receiving ownership benefits
connected with CBM gas in the form of revenues either from the sale of CBM gas
or from oil and gas leases granted to oil companies. The Tribe sought a
declaration of its ownership of the CBM gas, injunctive relief, and damages
based on theories including trespass and conversion. The Tribe also sued the
United States, claiming breach of fiduciary duty to manage the Tribe's trust
The district court granted summary judgment in favor of all
defendants, holding that Congress did not include CBM gas in its reservation to
the United States of "coal" under the 1909 and 1910 Acts. 874 F. Supp. 1142,
1151 (1995). The district court reasoned that it should give Chevron deference
to a 1981 opinion letter of the Solicitor of the Department of the Interior
interpreting the 1909 and 1910 Acts as excluding CBM gas from the reservation of
rights. 874 F. Supp. at 1159-60.
A panel of the Tenth Circuit unanimously reversed. 119 F.3d 816
(1997). The court of appeals subsequently granted rehearing en banc and, by a
6-3 vote, substantially adopted the panel opinion. 151 F.3d 1251, 1256 (1998).
The en banc court reviewed definitions of "coal" that were contemporaneous with
the passage of the Acts and concluded that they revealed a common understanding
of coal as a complex substance, and not just the solid rock. Id. at
1259-60. Like the panel, the en banc court held that Congress's broad general
intent and the absence of a clear conveyance of CBM to the private land owners,
coupled with the principle of statutory construction resolving ambiguities in
favor of the sovereign, led to the conclusion that CBM was reserved to the
United States. Id. at 1265-66. The en banc court left in place the
panel's conclusion that the district court was wrong to give Chevron deference
to the 1981 Solicitor's opinion, explaining that such deference is owed only to
legislative rules and to agency adjudications that create binding precedents.
151 F.3d at 1256; 119 F.3d at 832. The circuits have split 8-4 on this issue,
with the majority rejecting the limitation endorsed by the Tenth Circuit.
Although the United States was a defendant in the district
court and had adopted the arguments of the private landowner defendants at the
summary judgment stage, it urged the Court not to grant review. Among other
things, the Solicitor General pointed out that Congress has enacted legislation
— the Enzi Act, Pub. L. No. 105-367, 112 Stat. 3313 — which provides that
landowners, other than the parties to this action, who have commenced CBM
leasing and drilling activities on lands covered by the Acts will not be
affected by the Tenth Circuit's opinion. The United States also announced in its
brief that the Solicitor of the Department of the Interior was withdrawing the
1981 opinion letter regarding CBM ownership and would reconsider the agency's
analysis in light of the Tenth Circuit's opinion, thereby removing the issue of
Chevron deference from this case. This announcement drew a stinging rebuke from
Amoco, which criticized the Interior Department's "issuance, on the date the
brief of the United States was due, of a one-sentence order withdrawing a
binding opinion of the Solicitor of Interior of 17 years' standing on which the
coalbed gas industry was built," as a "blatantly political and cynical act"
aimed at "preserving at all costs a ruling in favor of" the Ute Tribe and
"manipulating this Court's docket."
This case is of obvious interest to businesses that own mineral
rights or hold mineral leases on public lands subject to reservations of rights
by the United States. The Court's decision should also clarify the extent to
which informal agency pronouncements are entitled to judicial deference under
Chevron — an issue of substantial interest to all businesses that are subject to
oversight and regulation by government agencies.
This Mayer, Brown, Rowe & Maw Supreme Court Docket Report provides information and
comments on legal issues and developments of interest to our clients and
friends. The foregoing is not a comprehensive treatment of the subject matter
covered and is not intended to provide legal advice. Readers should seek
specific legal advice before taking any action with respect to the matters