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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 Washington office.

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 resources.

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 discussed herein.

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