United States District Court, W.D. Louisiana, Lake Charles Division
W&T OFFSHORE, INC.
S.M.R. JEWELL, SECRETARY, UNITED STATES DEPARTMENT OF INTERIOR; ET AL.
REPORT AND RECOMMENDATION
KATHLEEN KAY, UNITED STATES MAGISTRATE JUDGE
the court are Motions for Summary Judgment [docs. 22, 26]
filed, respectively, pursuant to Rule 56 of the Federal Rules
of Civil Procedure by plaintiff W&T Offshore, Inc.
(“W&T) and defendants S.M.R. Jewell, former
Secretary of the United States Department of the Interior
(“DOI”), and Gregory J. Gould, Director of the
Office of Natural Resources and Revenue (“ONRR”)
of the Department of the Interior (collectively,
“federal defendants”). Both motions are opposed.
Docs. 26, 90. Also before the court is W&T's Motion
to Strike Extra-Record Material [doc. 97], pertaining to
citations in the federal defendants' reply [doc. 96] to
W&T's amended memorandum [doc. 90] in opposition to
the federal defendants' Motion for Summary Judgment [doc.
26] and reply in support of its own Motion for Summary
Judgment [doc. 22]. The federal defendants oppose the Motion
to Strike. Doc. 99.
following reasons, IT IS RECOMMENDED that
the Motion to Strike [doc. 97] be GRANTED,
that W&T's Motion for Summary Judgment [doc. 22] be
GRANTED IN PART and DENIED IN
PART, as described below, and that the federal
defendants' Motion for Summary Judgment [doc. 26]
likewise be GRANTED IN PART and
DENIED IN PART.
case arises as a request for judicial review by W&T of a
final decision (“final DOI decision”) by the
Interior Board of Land Appeals (“IBLA”),
W&T Offshore, Inc., 184 IBLA 272 (Feb. 11,
2014). Doc. 1. In that decision the IBLA affirmed the ruling
of the Director of the ONRR, denying W&T's challenges
to the methodology applied by DOI for resolving amounts owed
from final delivery imbalances upon the end of W&T's
participation in DOI's Royalty in Kind
the RIK program, which began following a series of pilot
sales in 1998 and dramatically expanded until 2007, the
Minerals Management Service (a DOI subagency and predecessor
of ONRR) expanded its ability to receive royalties “in
kind” rather than “in value” from oil and
gas companies operating on federal leases.
WT001348-49. Throughout the existence of the RIK
program, DOI never promulgated regulations for its
administration. However, it did provide guidance to
participating companies, primarily through two “Dear
Operator” letters issued in 2000 and 2005,
respectively, and through a section of the Minerals Revenue
Reporter Handbook issued by MMS in 2003. WT000009-10;
see WT001426-38 (September 2000 letter); WT001526-32
(September 2005 letter); WT001124-28 (handbook section).
began participating in the RIK program as the Facility
Measurement Point (“FMP”) operator of certain
offshore leases, collectively known as the “EC373
Leases, ” in November 2001. WT000006, n. 7; see
also doc. 1, p. 7. Over the course of its participation
relative to the EC373 leases W&T overdelivered the volume
of natural gas due in some months and underdelivered in
others. See, e.g., WT000006; WT001443-44;
WT000184. DOI terminated its election to receive royalties in
kind from the EC373 leases on October 31, 2008, reverting to
receipt of royalty in value and causing the imbalance to
become fixed for accounting purposes. E.g.,
WT000006; WT001443-44. In September 2009, the Secretary of
the Interior announced the phase-out of the RIK program as a
March 16, 2010, MMS issued to W&T an order to pay $1,
649, 529.51 in additional royalties for the EC373 leases for
production months February 2003 through October 2008.
WT000198-203. The order stated that it was based on the
Royalty Simplification and Fairness Act of 1996 and the
Federal Oil and Gas Royalty Management Act of 1982, and that
it superseded all Dear Operator letters “involving the
resolution of operator imbalances on oil and gas production
related to properties that are or have been in RIK.”
Id. at WT000199. The order also indicated that MMS
would compute late-payment charges (i.e., interest) and bill
W&T accordingly after it had received payment under that
order. WT000200. A second order was issued on December 7,
2010, by MMS's successor agency, ONRR, requiring W&T
to pay an additional $74, 049.01 in royalties on the EC373
leases for production months February 2008 through September
2008. WT000347- 52. W&T filed an unsuccessful appeal of
these orders with ONRR Director Gregory J. Gould.
WT000037-60. The ONRR concluded that W&T paid the
principal amount owed under the March 2010 order prior to the
appeal but W&T was assessed $673, 516.99 in late-payment
interest. WT000037. W&T appealed to the IBLA, which
affirmed the ONRR Director's decision in the final DOI
decision, referenced supra. WT00001-35.
now seeks judicial review in this court of the final DOI
decision through a complaint for declaratory and injunctive
relief. Generally, it continues to challenge the methodology
through which final imbalances were calculated upon
termination of its participation in the RIK program.
Id. It now moves for summary judgment, raising the
following challenges in particular:
1. The final DOI decision unlawfully contradicts the OCSLA
and DOI regulations.
2. Regardless of how RIK delivery imbalances are resolved,
DOI must give W&T credit for all deliveries to DOI during
the period of DOI's RIK election for the EC373 leases.
3. DOI's retroactive application of a new, industry-wide
method for resolving RIK delivery imbalances violates APA
rulemaking requirements and the fair notice doctrine 4.
W&T has no liability to DOI for underdeliveries
attributable to lease interests owned by other lease/unit
owners 5. The final DOI decision is not supported by the
Doc. 22, att. 2. The federal defendants likewise move for
summary judgment, opposing all of the claims raised above.
Doc. 26, att. 2. W&T also requests that this court strike
exhibits in the federal defendants' reply brief, or
alternatively take judicial notice of a pending
administrative appeal. Doc. 97.
should grant a motion for summary judgment when the
pleadings, including the opposing party's affidavits,
“show that there is no genuine issue as to any material
fact and that the movant is entitled to judgment as a matter
of law.” Fed.R.Civ.P. 56(c); see also Celotex Corp.
v. Catrett, 106 S.Ct. 2548, 2553 (1986). The party
moving for summary judgment is initially responsible for
demonstrating the reasons justifying the motion for summary
judgment by identifying portions of pleadings and discovery
that show the lack of a genuine issue of material fact for
trial. Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954
(5th Cir. 1995). The court must deny the moving party's
motion for summary judgment if the movant fails to meet this
the movant makes this showing, the burden then shifts to the
non-moving party to set forth specific facts showing that
there is a genuine issue for trial. Anderson v. Liberty
Lobby, Inc., 106 S.Ct. 2505, 2510 (1986). The burden
requires more than mere allegations or denials of the adverse
party's pleadings. The non-moving party must demonstrate
by way of affidavit or other admissible evidence that there
are genuine issues of material fact or law. Celotex,
106 S.Ct. at 2553. There is no genuine issue of material fact
if, viewing the evidence in the light most favorable to the
non-moving party, no reasonable trier of fact could find for
the non-moving party. Tolan v. Cotton, 134 S.Ct.
1861, 1866 (2014). Furthermore, a court may not make
credibility determinations or weigh the evidence in ruling on
a motion for summary judgment. Reeves v. Sanderson
Plumbing Prods., Inc., 120 S.Ct. 2097, 2110 (2000).
However, the nonmovant must submit “significant
probative evidence” in support of his claim. State
Farm Life Ins. Co. v. Gutterman, 896 F.2d 116, 118 (5th
Cir. 1990). If the evidence is merely colorable or is not
significantly probative, summary judgment may be granted.
Anderson, 106 S.Ct. at 2511.
Review of Agency Determinations under the APA
party seeks review of an agency action under the
Administrative Procedure Act (“APA”), 5 U.S.C.
§ 551 et seq., the district court serves
“as an appellate tribunal.” Am. Bioscience,
Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001).
It is the agency's role to resolve factual issues and
arrive at a decision supported by the administrative record,
while the district court must determine whether, as a matter
of law, “the evidence in the administrative record
permitted the agency to make the decision it did.”
Stuttering Found. Of Am. v. Springer, 498 F.Supp.2d
203, 207 (D.D.C. 2007) (quotations omitted). Thus,
“[s]ummary judgment . . . serves as the mechanism for
deciding, as a matter of law, whether the agency action is
supported by the administrative record and otherwise
consistent with the APA standard of review.”
the APA, in relevant part, a court will overturn an agency
action if it is:
(A) arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law; (B) contrary to
constitutional right, power, privilege, or immunity; (C) in
excess of statutory jurisdiction, authority, or limitations,
or short of statutory right; [or] (D) without observance of
the procedure required by law.
5 U.S.C. § 706(2).
party challenging the agency's action bears the burden of
showing that the agency's determination was arbitrary and
capricious. La. Pub. Serv. Comm'n v. F.E.R.C.,
761 F.3d 540, 558 (5th Cir. 2014). As the federal defendants
emphasize, arbitrary and capricious review is
“narrow” and we may not substitute our own
judgment for that of the agency. City of Arlington, Tex.
v. F.C.C., 668 F.3d 229, 260 (5th Cir. 2012). Instead,
“[w]e limit our review to whether the agency
articulated a rational connection between the facts found and
the decision made, and it is well-settled that an
agency's action must be upheld, if at all, on the basis
articulated by the agency itself.” Id.
(quoting Hayward v. U.S. Dep't of Labor, 536
F.3d 376, 380 (5th Cir. 2008)). Nonetheless, the agency is
still required to “examine the relevant data and
articulate a satisfactory explanation for its action.”
Motor Vehicle Manf. Ass'n of the U.S. v. State Farm
Mutual Auto. Ins. Co., 103 S.Ct. 2856, 2866 (1983);
see Harris v. United States, 19 F.3d 1090, 1096 (5th
Motion to Strike
Motion to Strike relates to two exhibits attached by the
federal defendants to their reply in support of their Motion
for Summary Judgment. See doc. 96. Exhibit 1
contains correspondence between a W&T employee and MMS
employees from March and April 2009. See doc. 96,
att. 1. Exhibit 2 is a communication from an MMS employee to
a W&T employee dated December 2008. See doc. 96,
att. 2. Both are cited in the reply memorandum to show that
W&T was aware of and complied with portions of the
methodology for resolving RIK imbalances prior to its alleged
unveiling in the orders to pay at issue here. See
doc. 96, pp. 6-7, n. 2. In their opposition to the Motion to
Strike, the federal defendants contend that these documents
show that W&T accepted the agency's methodology for
resolving RIK imbalances when it benefitted W&T to do so,
W&T now moves to strike the exhibits as extra-record
evidence or, in the alternative, for this court to take
judicial notice of its pending administrative appeal
ONRR's 2015 denial of a refund demand issued by W&T.
Doc. 97, att. 1. The Administrative Procedure Act,
supra, only permits non-statutory judicial review of
final agency actions. Veldhoen v. U.S. Coast Guard,
35 F.3d 222, 225 (5th Cir. 1994) (citing 5 U.S.C. §
704). Under the “record rule, ” review of agency
action in a district court is generally limited to the
administrative record before the agency. Sierra Club v.
Peterson, 185 F.3d 349, 369-70 (5th Cir. 1999); see
State of Louisiana ex rel. Guste v. Verity, 853 F.2d
322, 327 n. 8 (5th Cir. 1988) (“Agency action is to be
upheld, if at all, on the basis of the record before the
agency at the time it made its decision.”) (citation
omitted). The final agency action in this matter is the final
DOI decision. Here, therefore, the record is a matter of what
was before the IBLA when it rendered its decision in 2014.
federal defendants do not refute that their exhibits are
extra-record material, but instead offer that the court may
consider them as an exception to the record rule in order
“to provide context in understanding the scope of
inconsistencies found in W&T's arguments, as opposed
to the agency's consistent application of the
statute.” Doc. 99, p. 2. They rely on the Fifth Circuit
recognition of certain exceptions to the record rule,
including when the court needs “to supplement the
record with ‘background information' in order to
determine whether the agency considered all of the relevant
factors.” Medina County Environmental Action
Association v. Surface Transport Board, 602 F.3d 687,
706 (5th Cir. 2010) (citing Am. Wildlands v.
Kempthorne, 530 F.3d 991, 1002 (D.C. Cir. 2008))
(emphasis added). The government fails to show, however, that
W&T's inconsistent acceptance of its methodologies is
sufficiently relevant to the DOI's considerations on
review of this matter. Accordingly, the Motion to Strike
should be granted as to Exhibits 1 and 2 to
Docket Entry 96 and portions of that memorandum citing to
those exhibits. Having recommended that W&T's Motion
to Strike be granted, we decline to consider its alternative
request for judicial notice of a pending administrative
opposition to the Motion to Strike, the federal defendants
request that the court “strike and disregard all
portions of W&T's briefs citing to extra-record
materials.” Doc. 99, p. 4. The request does not provide
us with sufficient information to identify the extra-record
information or arguments based on same at issue. Moreover, it
was cursorily asserted for the first time in a response to
W&T's motion to strike and therefore is not properly
before the court due to the federal defendants' failure
to raise it in a separate motion. See, e.g.,
Santoli v. Village of Walton Hills, 2015 WL 1011384,
*8 n. 3 (N.D. Ohio Mar. 3, 2015). Accordingly, this request
is not addressed.
Motions for ...