Solenex LLC v. Bernhardt

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

SOLENEX, LLC,
Plaintiff
Vv. Civil Case No. 13-993 (RJL)
DEB HAALAND, in her Official

Capacity as Secretary of the Interior,! et
al.,

Nee Nae Nee Nee re Nee ee ee ee ee ee”

Defendants.

unm Atom OPINION

September F. 2022 [Dkts. # 156, 162, 164]

Plaintiff Solenex, LLC (“Solenex”) holds a federal oil and gas lease in Montana first

issued in 1982. Yet even though the responsible federal agencies first approved a proposal
to initiate drilling on the land in 1985, a never-ending series of administrative reviews have
precluded any activity for nearly forty years. How Kafkaesque! Finally, in 2013, Solenex
brought this suit against the Secretary of the Interior, the Secretary of Agriculture, the
Director of the Bureau of Land Management, the Chief of the Forest Service, and other
subordinate federal officials (collectively, “federal defendants” or “the Government”) to
compel the Government to validate their already-approved drilling permit. In 2016, after
much litigation, I ordered the Government to render a final decision on Solenex’s

application. Amazingly, the Government responded by cancelling the underlying lease—

1 Pursuant to Federal Rule of Civil Procedure 25(d), Secretary of the Interior Deb Haaland
is substituted as the lead defendant.
the validity of which was not in dispute before this litigation arose—and disapproving the
permit to drill. And now, six years and a trip to our Circuit Court later, I am finally in a
position to address the merits of that decision. Now before this Court are cross-motions
for summary judgment by Solenex, the Government, and six non-profit organizations that
have intervened as of right in this matter (collectively, “intervenors”).* Because the
Government lacked legal authority to rescind the lease and its withdrawal of the approved
permit to drill was arbitrary and capricious, I will GRANT Solenex’s motion for summary
judgment [Dkt. # 156], DENY the Government and intervenors’ motions for summary
Judgment [Dkts. #164, 162], VACATE the Secretary’s March 17, 2016 decision
rescinding the lease and disapproving the Application for Permit to Drill, and REMAND
this case to the Secretary of the Interior to reinstate the lease and previously approved
Application for Permit to Drill.
BACKGROUND

I. Regulatory Landscape
A. Mineral Leasing Act

The Mineral Leasing Act of 1920 (“MLA”) authorizes the Secretary of the Interior
(the “Secretary”) to issue leases for “[a]ll lands subject to disposition under this Act which
are known or believed to contain oil or gas deposits.” 30 U.S.C. § 226(a). The Secretary

exercises authority over those leases, and the underlying land, pursuant to the MLA, its

? Intervenors are the Pikuni Traditionalist Association, the Blackfeet Headwaters Alliance,
the Glacier-Two Medicine Alliance, the Montana Wilderness Association, the National
Parks Conservation Association, and the Wilderness Society.

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implementing regulations, and the Secretary’s inherent authority as the legal steward of
public lands. Silver State Land, LLC v. Schneider, 843 F.3d 982, 986 (D.C. Cir. 2016).
But that authority is not unbounded: once a lease has been issued, the MLA authorizes the
Secretary to bring a civil action to cancel the lease in only three circumstances: (1) if the
lease is in violation of the MLA, unless the current leaseholder is a bona fide purchaser,
30 U.S.C. §§ 184(h)(1), (h)(2); (2) if the lessee has violated the statute, regulations, or
terms of the lease, id. at § 188(a); or (3) on 30 days’ notice, upon violations of the lease’s
provisions if the lease is not producing, id. at § 188(b). The Secretary has also issued
regulations authorizing the administrative cancellation of (1) any lease for the lessee’s
failure “to comply with any of the provisions of the law, the regulations issued thereunder,
or the lease,” upon 30 days’ notice, 43 C.F.R. § 3108.3(a), or (2) any lease that was
“improperly issued,” id. at § 3108.3(d). Finally, the Supreme Court has recognized that
the Secretary holds “authority to cancel [a] lease administratively for invalidity at its

inception.” Boesche v. Udall, 373 U.S. 472, 476 (1963).

B. National Environmental Policy Act

The National Environmental Policy Act (“NEPA”) requires agencies to take a “hard
look” at the environmental consequences of certain agency actions before taking an action
that could significantly affect the environment. Robertson v. Methow Valley Citizens
Council, 490 U.S. 332, 350 (1989) (quoting Kleppe v. Sierra Club, 427 U.S. 390, 410 n.21
(1976)). To ensure that “hard look,” NEPA requires agencies to compile a detailed
Environmental Impact Statement (“EIS”) for those “major federal actions” that

“significantly affect[ ] the quality of the human environment.” Mayo v. Reynolds, 875 F.3d
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11, 15 (D.C. Cir. 2017) (quoting 42 U.S.C. § 4332(2)(C)). NEPA is essentially a
procedural statute and neither prohibits, nor requires, particular courses of action an agency
may consider in preparing an EIS. See Vt. Yankee Nuclear Power Corp. v. NRDC, 435
U.S. 519, 558 (1978). Nor is an EIS required for every federal action. For example, the
issuance of a comprehensive EIS is unnecessary if the agency makes a finding of no
significant impact on the environment after it “carefully considered the [ ] proposal, was
well informed on the problems presented, identified the relevant areas of environmental
concern, and weighed the likely [environmental] impacts.” Cabinet Mtns.
Wilderness/Scotchman’s Peak Grizzly Bears v. Peterson, 685 F.2d 678, 682-83 (D.C. Cir.
1982); accord Am. Bird Conservancy v. FCC, 516 F.3d 1027, 1034 (D.C. Cir. 2008) (citing
Cabinet Mins., 685 F.2d at 682). In the context of federal leases under the MLA, an EIS
is only necessary “if the [agency] chooses not to retain the authority to preclude all surface
disturbing activities.” Sierra Club v. Peterson, 717 F.2d 1409, 1412 (D.C. Cir. 1983).

C. National Historic Preservation Act

Like NEPA, the National Historic Preservation Act (“NHPA”) is essentially a
procedural statute. Nat'l Mining Ass’n v. Fowler, 324 F.3d 752, 755 (D.C. Cir. 2003).
While it does not dictate outcomes, NEPA requires an agency to “stop, look, and listen”
before undertaking a course of action. J//. Com. Comm’n v. ICC, 848 F.2d 1246, 1261
(D.C. Cir. 1988). And just as NEPA only applies to a subset of government actions, NHPA
has only ever applied to government “undertaking[s].” See 16 U.S.C. § 470f (1981); 54
U.S.C. § 306108 (2022). In 1982, NHPA defined “undertaking” as “any action as
described in Section 106.” 43 U.S.C. § 1601(7) (1981). Section 106, in turn, imposed

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requirements on the responsible federal officials “prior to the approval of the expenditure
of any Federal funds on the undertaking or prior to the issuance of any license.” National
Historic Preservation Act, Pub. L. No. 89-665, § 106, 80 Stat. 915, 917 (1966). Absent an
expenditure of federal funds or the grant of a federal license, § 106 did not, and does not,
apply to a project. Nat’l Mining Ass’n, 324 F.3d at 759 (quoting Sheridan Kalorama Hist.
Ass'n v. Christopher, 49 F.3d 750, 755-56 (D.C. Cir. 1995).

In cases in which it applies, NHPA requires the relevant agency to “take into account
the effect of [an] undertaking on any historic property.” 54 U.S.C. § 306108. To conduct
a review under NHPA, the agency first identifies the relevant “Area of Potential Effects”
(“APE”), defined as “the geographic area or areas within which an undertaking may
directly or indirectly cause alterations in the character or use of historic properties.” 36
C.F.R. § 800.16(d). The agency then determines whether the APE contains any “historic
properties” that are either listed in, or eligible for, the National Register of Historic Places.
Id. at § 800.4. If any such properties exist, the agency evaluates whether the proposed
undertaking will cause any “adverse effects,” as defined in the regulations, on that property
or properties. /d. at § 800.5. If so, the agency considers whether those effects can be
resolved, minimized, or otherwise mitigated. Jd. at § 800.6.

As originally enacted in 1966, NHPA neither required, nor contemplated,
consultation with Native American tribes. See generally National Historic Preservation
Act, Pub. L. No. 89-665, 80 Stat. 915 (1966). However, Congress amended NHPA in 1980
to express a general policy that the federal government ought to coordinate with Native

American tribes to accomplish the purposes of the legislation but did not require such

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consultation at that time. An Act to Amend the National Historic Preservation Act of 1966,
Pub. L. No. 96-515, 94 Stat 2987 (1980), codified at 16 U.S.C. § 470-1 (1980). In 1992,
NHPA was amended again to require consultation with tribes if an undertaking may affect
property of “religious and cultural significance” to a federally recognized tribe.
Reclamation Projects Authorization and Adjustment Act of 1992, Pub. L. No. 102-575,
106 Stat 4600.

II. Procedural History

Certain elements of this case’s factual background have been set forth in this Court’s
previous opinion, see Solenex LLC v. Jewell (Solenex I, 334 F. Supp. 3d 174 (D.D.C.
2018), and that of our Circuit Court, see Solenex LLC. v. Barnhardt (Solenex Il, 962 F.3d
520 (D.C. Cir. 2020). Accordingly, I will limit my recitation of the facts to the issues
directly relevant at hand.

In February 1981, in anticipation of the issuance of nearly 200 pending leases in the
Badger Two Medicine area of the Lewis and Clark National Forest in Montana, the United
States Forest Service (“Forest Service”), part of the Department of Agriculture, jointly
issued a 165-page Environmental Assessment (“EA”). Env’tl Assessment, App. Vol. IV
[Dkt. # 45-10] at 8 et seg. The Bureau of Land Management (“BLM”), a component of the
Department of the Interior and the agency responsible for issuing the contemplated leases,
cooperated in the production of the report. Jd. at 11. The EA considered six alternatives,
“rang[ing] from denial of all lease applications to leasing all applied for lands with
appropriate stipulations to protect surface resources and land uses.” Jd. at 13; see also id.
at 48-49. The Forest Service selected the third alternative, under which “occupancy

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leasing would only be recommended for accessible areas which can be adequately
protected during oil and gas activity.” Jd. at 11. In light of that policy choice and a specific
finding that any “surface disturbing activities” to be conducted in support of oil and gas
drilling would be subject to further analysis and approvals, the Forest Service issued a
“finding of no significant impact.” Jd. at 10.

While the primary purpose of the EA was to comply with NEPA, the Government
also initiated a review of relevant historic properties that could be impacted by the proposed
leases. Specifically, the EA included a review of “Cultural (Archeological, Historic, and
Religious) Resources.” Jd. at 44. The EA further noted that the Forest Service began to
engage with the Blackfeet Tribe in the fall of 1979, as required under the American Indian
Religious Freedom Act, but noted that “the Blackfeet people prefer to identify” areas of
spiritual importance “on a project-by-project basis.” Jd. at 45.

More than a year later, in June 1982, the Government issued the lease now held by
Solenex (the “Lease”) to Mr. Sidney Longwell. Attached to the lease were a set of “Surface
Disturbance Stipulations” that required the leaseholder to obtain “prior approval” for any
surface disturbing operation.” Lease M-53323, Admin. Record (“A.R.”), Vol. VIII, Part 2
(HC 00886) [Dkt. # 114-1] at 7. As our Circuit Court noted, “Longwell was required to
obtain permission from both [BLM] and the Forest Service before drilling could occur.”
Solenex II, 962 F.3d at 523. Longwell subsequently assigned his interest in the lease to
three Texas companies, America Petrofina Company of Texas, Petrofina Delaware, Inc.,

and AGIP Petroleum Company (collectively, “Fina’”). Fina filed an Application for Permit
to Drill (“APD”) in November 1983, and, after issuing a second EA, the Government
approved that application in January 1985. Id.

In response, the Blackfeet Tribe and several conservation groups filed an
administrative appeal in 1985 with the Interior Board of Land Appeals (“IBLA”) alleging
that approval of the APD violated several federal statutes, including NEPA and the NHPA.
Id. Repeatedly finding no violation existed, the Government would ultimately approve
Fina’s application three more times, in 1987, 1991, and 1993, but remanded the approval
each time for further consideration. Jd. at 524. Most importantly, the Government
“undertook a comprehensive environmental, cultural, and historical study” and issued a
982-page, full-blown Environmental Impact Statement (“EIS”) in 1990. Jd. In 1993, the
BLM stayed the latest approval due to proposed legislation to close the Two Medicine Area
to oil and gas exploration. Jd. That legislation never passed, but while it was pending, the
Forest Service determined the presence of a property eligible for the National Register of
Historic Places within the Two Medicine Area and further stayed the approval for
additional review. Jd. That determination led to yet more review by the Forest Service.

Four developments arising from the ongoing NHPA review during this period merit
attention. First, in 2002, the Forest Service designated the more than 165,000 acres of the
Badger-Two Medicine Blackfoot Traditional Cultural District (“TCD”), including the
entire land area covered by the Lease, as eligible for listing in the National Register of
Historic Places. Id. Second, in 2003, the Forest Service designated approximately 5,000
acres surrounding Solenex’s proposed drilling operation as the relevant APE. Forest

Service Memorandum regarding The Area of Potential Effect (APE), Longwell

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Consultation, App. Vol. I, Part 1 [Dkt. # 45-7] at 41-42 (FS 003785-86); Letter from
Forest Supervisor Rolando Ortegon re: 106 Consulting Process (July 18, 2003), App. Vol.
V, Part 2 [Dkt. # 48-2] (“Ortegon Letter”) at 74-75 (FS 003730-31). In evaluating the
APE, the Forest Service, relying on well-established methods, determined the physical
perimeter beyond which a person could not see, hear, or smell any trace of the proposed
activities. Ortegon Letter, App. Vol. V, Part 2 at 74-75. The proposed APE covered a
small fraction of the newly designated TCD. See id. at 77-78 (FS 00373334). Third, the
Forest Service also commissioned multiple ethnographic studies, including a 2012 study
on which the Government would later rely in reaching its final decision to disapprove
Solenex’s application. Lease Decision, A.R. Vol. X, Part 8 [Dkt. # 116-7] at 46
(SUPP.AR000388). Finally, after nearly twenty years of frustration, Fina reassigned the
Lease to Longwell who, in turn, assigned the Lease to Solenex. /d at 42 n2
(SUPP.AR000384).

In 2013, more than three decades after the Lease first issued, Solenex brought this
suit against the Government to compel resolution of the long-pending application to drill.
See generally Compl. [Dkt. # 1]. In April 2014, while the suit was pending, the Forest
Service dramatically revised the 2003 APE, determining instead that the proper APE for
the Solenex venture was the entire 165,000-acre TCD first designated in 2002. Lease
Decision, A.R. Vol. X, Part 8 [Dkt. # 116-7] at 46 (SUPP.AR000388). In making this
determination, the Forest Service relied on statements by the Blackfeet Tribal Historic

Preservation Officer (“THPO”) ascribing great significance to the spiritual and religious
power of the Two Medicine Area. Memorandum from Mark Bodily, Forest Archeologist
(Apr. 3, 2014), App. Vol. XI [Dkt. # 177] at 237 (FS 006398).

Meanwhile, the proceedings in this Court continued. As described more fully in
both this Court’s decision and that of our Circuit Court, I ultimately ordered the
Government to reach a final decision on the Lease in 2016. The Government did so,
cancelling the Lease and disapproving the application for permit to drill. See Solenex I,
334 F. Supp. 3d at 180. Solenex challenged that decision on the grounds that the Secretary
failed to consider Solenex’s reliance interests. Jd. at 182-84. I granted Solenex’s motion
for summary judgment and vacated the Government’s decision on those grounds, see id. at
184, and our Circuit Court reversed and remanded, see Solenex IT, 962 F.3d at 528-30.

On remand, Solenex amended its complaint to challenge the Lease Decision on the
merits. See Second Am. and Suppl. Compl. (“Compl.”) [Dkt. #151]. The parties and
intervenors have filed cross-motions for summary judgment. See Pls.’ Mot. for Summ. J.
(“Pls.’ Mot.”) [Dkt. # 156]; Def.-Intervenors’ Mot. for Summ. J. (“Def.-Int.’s Mot.”) [Dkt.
# 162]; Federal Defs.’ Cross-Mot. for Summ. J. (“Defs.’ Mot. for Summ. J.”) [Dkt. # 164].
These motions have been fully briefed. See Pls. Mot. for Summ. J. Reply and Opp’n to
Fed. Defs.’ Cross-Mot. (“Pls.” Opp’n to Fed. Defs.”) [Dkt. # 170]; Pls. Reply In Supp. of
Mot. for Summ. J. and Opp’n to Def.-Intervenors’ Cross-Mot. (“Pls.’ Opp’n to Def.-Ints.”)
[Dkt. # 172]; Federal Defs. Reply in Supp. of Their Cross-Mot. for Summ. J. (“Fed. Defs.’
Reply”) [Dkt. # 175]; Def.-Intervenors’ Reply in Supp. of Cross-Mot. for Summ. J. (“Def.-
Ints.’ Reply”) [Dkt. # 176]. Finally, the Blackfeet Tribe has filed an amicus brief in support

of defendants and intervenors. See The Blackfeet Tribe’s Amicus Curiae Br. Supporting

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Defs.’ Cross-Mot. for Summ. J. and Def.-Intervenors Mot. for Summ. J. and in Opp’n to

Pl.’s Mot. for Summ. J. (“Amicus Br.”) [Dkt. # 168].

LEGAL STANDARD

This case comes before the Court on the parties’ cross-motions for summary
judgment. Under Federal Rule of Civil Procedure 56(a), “The court shall grant summary
judgment if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).. When
evaluating cross-motions for summary judgment, “the court shall grant summary judgment
only if one of the moving parties is entitled to judgment as a matter of law upon material
facts that are not genuinely disputed. Summary judgment is also appropriate where, as here,
review is on the administrative record.” Select Specialty Hosp.-Bloomington, Inc. v.
Sebelius, 774 F. Supp. 2d 332, 338 (D.D.C. 2011) (citation omitted).

In reviewing a challenge to agency action brought under the Administrative
Procedure Act, the Court 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.” Fund for Animals v. Babbitt, 903 F. Supp.
96, 105 (D.D.C. 1995) (citing Marsh v. Ore. Nat. Res. Council, 490 U.S. 360, 378 (1989)).
While a reviewing court may not “substitute its judgment for that of the agency,” Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins., 463 U.S. 29, 43 (1983), the court must
set aside agency action upon a showing that it was “arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with law,” 5 U.S.C. § 706(2)(A). Finally, the

11
Court may only uphold agency action for the reasons provided in taking that action.

Michigan v. EPA, 576 U.S. 743, 758 (2015).

DISCUSSION
I. The rescission of the Lease must be vacated

The Secretary lacked authority to cancel the Lease because the Secretary only has
the power to administratively cancel improperly issued leases, which the Lease here was
not. Issuance of the Lease violated neither NEPA nor NHPA. And even if the Lease did
suffer from some legal infirmity that would have made the Lease voidable in 1982, the
Government subsequently affirmed the Lease and, as such, waived any right to cancel it
before 2016. Therefore, the decision to rescind the Lease must be set aside.

A, The Secretary lacks authority to cancel a lease valid when issued

The existence of a legal defect is a necessary precondition to the Secretary
exercising her authority to administratively cancel the lease. The Government here,
however, has identified no authority for the proposition that the Secretary may unilaterally
cancel a lease that was properly issued. Instead, the Government has shown, at most, that
the Secretary may have authority to administratively cancel a lease that was invalid when
it was issued.

Indeed, the Government concedes that the Secretary did not rely on the statutory
provisions of the MLA to cancel the Lease. See Defs.’ Mot. for Summ. J. at 14. But the
MLA’s scheme allowing for the Secretary to cancel certain leases is nonetheless
instructive. The MLA identifies three circumstances in which the Secretary may

12
administratively cancel a lease: (1) upon violation of the MLA, unless the current
leaseholder is a bona fide purchaser, 30 U.S.C. §§ 184(h)(1), (h)(2); (2) upon violation of
the statute, regulations, or terms of the lease, id. at § 188(a); or (3) on 30 days’ notice, upon
violations of the lease’s provisions if the lease is not producing, id. at § 188(b). Each
requires the Secretary to show a violation of the statute, regulations, or terms of the lease.
Nowhere does the statute contemplate granting the Secretary unfettered discretion to cancel
a validly issued lease without showing a subsequent statutory, regulatory, or contractual
violation.

Nor does the Secretary’s inherent authority extend to the power to cancel a valid
lease. That authority is limited, at most, to cases in which the lease suffered from some
legal defect when first issued. Boesche v. Udall, which the Secretary cites as supporting
this expansive authority, stands only for the proposition that a lease that was “‘invalid[ ] at
its inception” could be voided. 373 U.S. at 476. Indeed, our Circuit Court has consistently
read Boesche to extend no further. E.g., Silver State Land, LLC, 843 F.3d at 990; see also
Ivy Sports Med. v. Burwell, 767 F.3d 81, 93 (D.C. Cir. 2014) (Pillard, J., dissenting) (same);
Texaco, Inc. v. Hickel, 437 F.2d 636, 641 (D.C. Cir. 1970) (same); Udall v. Littell, 366
F.2d 668, 672 n.10 (D.C. Cir. 1966) (same).

For the same reasons that Boesche does not authorize the Secretary to cancel a valid
lease, neither do the regulations cited by the Government and intervenors. The Secretary
argues that she had authority to cancel the lease because the MLA’s implementing

regulations at 43 C.F.R. § 3108.3(d) allow the Secretary to cancel any lease that was

13
“improperly issued.”? See Defs.’ Mot. for Summ. J. at 24 (citing Griffin & Griffin Expl.,
LLC v. United States, 116 Fed. Cl. 163, 167 (Fed. Cl. 2014)). But the regulation merely
codified “existing practice in considering specific situations,” which by its own terms
extends no further than whatever authority the Supreme Court recognized in Boesche. See
Minerals Management and Oil and Gas Leasing; Amendments to the Regulations Covering
Oil and Gas Leasing on Federal Lands, 48 Fed. Reg. 33648, 33655 (July 22, 1983). As
such, the regulations provide no basis to rescind a properly issued lease.
B. The Lease was valid when issued

The parties disagree whether a violation of NEPA or NHPA prior to issuance of a
lease would render the lease “invalid” such that it could be administratively canceled under
either the Secretary’s inherent authority or 43 C.F.R. § 3108.3(d). While no circuit court
appears to have addressed this precise question, the 10th Circuit has characterized the
Secretary’s power as the “authority to cancel oil and gas leases for violations of the Mineral
Leasing Act and regulations thereunder ....° Winkler vy. Andrus, 614 F.2d 707, 711 (10th

Cir. 1980) (emphasis added). In the nearly forty years since the regulation was

3 Solenex contests the applicability of this regulation because it was not promulgated until
after the lease was issued. But the lease was issued “subject to all rules and regulations of
the Secretary of the Interior now or hereinafter in force, when not inconsistent with any
express and specific provisions herein.” Lease M-53323, A.R., Vol. VIII, Part 2 [Dkt.
# 114-1] at 5 (HC 00884). This language on the face of the lease is probably sufficient to
find that the later-enacted regulation applies to the lease. Cf Mobil Oil Expl. & Producing
Se., Inc., v. United States, 530 U.S. 604, 616 (2000) (holding lease was not subject to later-
issued regulation because only future regulations issued under named statutes were
incorporated in the text of the lease). But the Court need not resolve this question, because
the Government can’t rescind the lease even if the Lease is subject to the later-enacted
regulation.

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promulgated in 1983, no court has found that a violation of a different statute, like NEPA
or NHPA, has formed the basis for cancellation under the authorities the Secretary cited in
cancelling the Lease. Nonetheless, because neither NEPA nor NHPA were violated, the
Court need not resolve this question. I will therefore assume, without deciding, that a
violation of either statute would provide grounds for cancellation.

NEPA and NHPA impose procedural requirements with which government
agencies must comply before acting, but neither requires that the agency elevate the
preservation of environmental or historical resources above other priorities. Instead, both
statutes only require the agency to take a “hard look” at the impact of a particular course
of government action to ensure “fully informed and well-considered decision[s].” New
York v. Nuclear Regul. Comm’n, 681 F.3d 471, 477 (D.C. Cir. 2012) (citation omitted); J//.
Com. Comm’n, 848 F.2d at 1260-61 (“Like section 102 of NEPA, section 106 of the
Historic Preservation Act is a ‘stop, look, and listen’ provision... .”). The Government
has met that standard here. How so?

1. The Government complied with NEPA

The Government complied with NEPA prior to issuing the Solenex lease. NEPA
does not require the agency to conduct a full EIS before issuing a lease in every instance.
Instead, under our Circuit Court’s precedent, if an agency issues a finding of “no significant
impact” after it “carefully considered the [ ] proposal, was well informed on the problems
presented, identified the relevant areas of environmental concern, and weighed the likely
impacts,” a full-blown EIS is unnecessary. Cabinet Mtns., 685 F.2d at 683; accord Am.

Bird Conservancy, 516 F.3d at 1034 (citing Cabinet Mtns., 685 F.2d at 683); Wyo. Outdoor

15
Council v. U.S. Forest Serv., 165 F.3d 43, 49 (D.C. Cir. 1999). The Government met that
standard here. It reviewed six alternative courses of action, carefully considered the
environmental issues, determined that a full-blown EIS was unnecessary, and produced a
161-page Environmental Assessment (“EA”) in 1981, before the lease was issued. Env’ tl
Assessment, App. Vol. IV [Dkt. # 45-10] at 8 et seg. That was sufficient to satisfy NEPA.
And, for more than thirty years, the Government consistently maintained that it had
complied with NEPA in issuing the Lease. In fact, the Government first raised any
concerns that NEPA was violated in 2015, more than two years after this suit was filed,
when the Government represented to this Court that the BLM “has tentatively concluded
the Lease was issued without properly complying with NEPA ....” Resp. to Ct. Order
[Dkt. # 58] at 3.

The Government and intervenors now challenge the sufficiency of the EA on the
theory that the Government failed to adequately consider a no action alternative. See Defs.’
Mot. for Summ. J. at 33; Def.-Int.’s Mot. at 30. Please! As an initial matter, and as this
Court previously found, the Government did consider a no-action alternative in the EA
before issuing the Lease. Solenex I, 334 F. Supp. 3d at 179; see also Env’tl Assessment,
App. Vol. IV [Dkt. # 45-10] at 13 (noting that the EA considered alternatives “rang[ing]
from denial of all lease applications to leasing all applied for lands with appropriate
stipulations”); id. at 48 (“No Action on Lease Applications at this Time’). Ultimately,
however, the Government rejected that alternative on the grounds that it was “in conflict
with National and Regional Forest Service policy.” Jd. at 48. That analysis was sufficient.

An EA requires only a “brief discussion[ ]” of reasonable alternatives to the proposed

16
action that “need not be as rigorous as the consideration of alternatives in an EIS.”
Myersville Citizens for a Rural Cmty. v. FERC, 783 F.3d 1301, 1323 (D.C. Cir. 2015)
(citing 40 C.F.R. § 1508.9(b)). In evaluating the alternatives before it in 1982, the
Government assessed the no-action alternative and reasonably eliminated it in light of
countervailing policy considerations. Env’tl Assessment, App. Vol. IV [Dkt. # 45-10] at
48. The Government and intervenors’ arguments seeking to apply the standards that
govern an EIS to an EA are unavailing.

The Government and intervenors also argue the Government could not rely on an
EA because the Secretary must prepare an EIS before issuing a mineral lease “if the
[agency] chooses not to retain the authority to preclude all surface disturbing activities.”
Sierra Club, 717 F.2d at 1415; see Defs.’ Mot. for Summ. J. at 32. But this misreads the
record! As our Circuit Court already found, the leaseholder “was required to obtain
permission from both the Bureau and the Forest Service before drilling could occur.”
Solenex IT, 962 F.3d at 523. The “Surface Disturbance Stipulations” attached to the Lease
require “prior approval” in the form of an approved APD before any “surface disturbing
operation.” Lease M-53323, A.R., Vol. VIII, Part 2 [Dkt. # 114-1] at 7 (HC 00886).
Moreover, the “Activity Coordination Stipulation” attached to the Lease required prior
approval before commencing “surface disturbance activities” across the entirety of the
Lease. Jd. at 12 (HC 00891). As required under the Sierra Club standard, the Government
retained “both the authority to preclude all activities pending submission of site-specific

proposals and the authority to prevent proposed activities if the environmental

17
consequences are unacceptable.” 717 F.2d at 1415. The Government did just that, so no
EIS was necessary before issuance of the Lease. Jd. at 1412.

The Government offers three arguments why the language of the Lease barring
surface-disturbing activities doesn’t mean what it says. See Fed. Defs.’ Reply at 12—15.
In short, the Government argues that the no-surface occupancy provisions of the Lease only
cover a small proportion of the total Lease, other terms of the Lease not present in the lease
at issue in the Sierra Club case are insufficient to distinguish the Lease from the general
rule drawn from that case, and a provision in the Lease in which the Government retained
authority to disallow surface occupancy to ensure compliance with the Endangered Species
Act failed to meet the Sierra Club standard because it was not specific to NEPA. Jd. But,
as Solenex notes in response, that interpretation is inconsistent with the record in this case.
Crucially, in Sierra Club, both the Secretary and Sierra Club agreed that the Government
could not preclude surface occupancy. Sierra Club, 717 F.2d at 1414 n.7. In this case, on
the other hand, the Government both held and exercised the authority to preclude Solenex
and its predecessors in interest from occupying the Lease to allow the Government to
determine whether “the environmental consequences” of proposed mineral exploration
activities “were unacceptable.” Jd. at 1415; see also Statement of Material Facts in Supp.
of Defs.’ Cross-Mot. for Summ. J. [Dkt. # 93-2] 4 13 (noting that the IBLA set aside BLM’s
1985 approval of Fina’s APD on the Lease to resolve various issues “before authorizing
any activity”); id. § 16 (noting that the Lease was again suspended in 1987 “to allow

additional environmental analysis’).

18
2. The Government complied with NHPA

Nor did the Department violate NHPA in issuing the lease. First, NHPA did not
apply to the issuance of the lease. Second, even if it had, NHPA did not require
consultation with the Blackfeet Tribe in 1982. And finally, even if NHPA required
consultation with the Blackfeet Tribe in 1982, the Government did so.

NHPA’s implementing regulations require federal agencies to complete the Section
106 process “prior to the approval of the expenditure of any Federal funds on the
undertaking or prior to the issuance of any license.” 36 C.F.R. § 800.1(c). But the
regulations do not restrict “nondestructive project planning activities” before this review
has been completed. Jd.; see also City of Grapevine v. Dep’t of Transp., 17 F.3d 1502,
1509 (D.C. Cir. 1994) (holding that agency action that did not authorize expenditure of
funds did not require NHPA approval). Instead, NHPA precludes government agencies
from taking any actions that could disturb the physical environment (or permit private
parties to disturb the physical environment) without the statutorily required review. Other
circuits have reached the same conclusion. See Nat’l Indian Youth Council v. Watt, 664
F.2d 220, 228 (10th Cir. 1981) (holding that NHPA’s requirements do not attach to the
issuance of a mineral lease that requires subsequent approval for surface disturbing
activities).

These limitations follow logically from the text of the statute. At all relevant times,
Section 106 of NHPA only imposed procedural requirements on federal “undertaking[s].”
54 U.S.C. § 306108 (2022); 16 U.S.C. § 470f (1981). Prior to 1992, including when the

Lease was issued in 1982, an agency action was only an “undertaking” within the meaning

19
of NHPA if a federal agency expended funds or licensed some action by another party.
Sheridan Kalorama Ass’n, 49 F.3d at 754; see also Lee v. Thornburgh, 877 F.2d 1053,
1056 (D.C. Cir. 1989). But no federal funds were expended in the issuance of the lease.
Nor is a lease a license: A lease is a “contract by which a rightful possessor of real property
conveys the right to use and occupy the property in exchange for consideration,” Lease,
Black’s Law Dictionary (11th ed. 2019), while a license is a “permission, usually
revocable, to commit some act that would otherwise be unlawful,” or a “permit,” License,
Black’s Law Dictionary (A\th ed. 2019). It follows that a lease is not an “undertaking”
within the meaning of the statute; the Government neither expends funds nor licenses any
otherwise unlawful activity by issuance of a lease. Therefore, Section 106 does not apply
to the issuance of a lease.

Further, even if issuance of the Lease was an undertaking, the Government was not
obligated to consult with the Blackfeet Tribe at that time. True, as the Government and
intervenors note, the 1980 amendments to NHPA contemplated a role for Native American
tribes. See Defs.’ Mot. for Summ. J. at 37; Def.-Int.’s Mot. at 35. But the provision of the
statute envisioning a role for Native American tribes only states a broad policy; it did not
obligate the Government to take specific steps to consult with tribes to comply with NHPA.
See Pub. L. No. 96-515, § 101, 94 Stat 2987, 2988 (1980) (“It shall be the policy of the
Federal Government, in cooperation with other nations and in partnership with the States,
local governments, Indian tribes, and private organizations and individuals to” take certain
actions in support of preserving historic properties); see also Cont’l Air Lines, Inc. v. Dep’t

of Transp., 843 F.2d 1444, 1451 (D.C. Cir. 1988) (“Application of ‘broad purposes’ of

20
legislation at the expense of specific provisions ignores the complexity of the problems
Congress is called upon to address and the dynamics of legislative action.”) (citation
omitted). Further, adopting the Government and intervenors’ preferred reading of the 1980
NHPA amendments would render the 1992 amendment requiring consultation as
surplusage. See Babbitt v. Sweet Home Chapter of Cmtys. for a Greater Ore., 515 U.S.
687, 698 (1995) (noting that courts should show “reluctance to treat statutory terms as
surplusage” in reviewing statutes).

Even if NHPA’s requirements were triggered upon issuance of the lease, the record
shows that the Government complied. The regulations in effect at the time directed the
agency to undertake efforts to “determine what historic and cultural properties are known
to be within the area of the undertaking’s potential environmental impact.” 36 C.F.R.
§ 800.4(a)(1) (1979). The Government did so. The 1981 EA inventoried historically
important properties before the lease was issued. Env’tl Assessment, App. Vol. IV [Dkt.
#45-10] at 44-45. And, the Government’s claims that the Forest Service “failed to consult
with the Blackfeet Tribe” notwithstanding, Defs.’ Mot. for Summ. J. at 36, the EA
specifically noted it consulted with the Blackfeet Tribe in an effort to identify sites of
particular significance, Env’tl Assessment, App. Vol. IV [Dkt. #45-10] at 45. But the
Blackfeet “preferred to identify these areas on a project-by-project basis.”* Jd. The fact

that the Blackfeet decided not to cooperate more fully with the assessment informing the

* The Blackfeet evidently shared the commonsense understanding of NHPA’s requirements
described here; that NHPA compliance was tied to specific “projects” likely to physically
disturb the land.

21
1981 EA does not mean that the Government failed to take a “hard look.” To hold
otherwise would incentivize private parties to withhold information from the Government
during NHPA consultations in order to bolster future litigation prospects.

Of course, Solenex’s venture was still ultimately subject to NHPA. As Solenex
concedes, Pl.’s Mot. at 53, the statute requires the Government to conduct its assessment
prior to issuing a license to conduct surface-disturbing activities like Solenex’s proposed
oil and gas drilling operations, which the parties agree is an “undertaking” within the
meaning of NHPA. See Wilson v. Block, 708 F.2d 735, 754 (D.C. Cir. 1983) (holding that
NHPA requires federal agencies only to survey properties that “may be affected by the
project”). And the Government was obligated to consult with Native American tribes for
those proceedings that occurred after the passage of the 1992 NHPA amendments. But,
again, the operative government action that triggers the Government’s obligations under
NHPA is the approval of those surface disturbing activities by approval of the APD.> The
out-of-circuit cases cited by the Government and intervenors for the proposition that leases
are undertakings as defined by NHPA cannot overcome the plain text of the statute!

Cc. Even if the Lease were voidable, the Government ratified it

The lease was valid when issued. But even if the lease were voidable at issuance,

the Government subsequently ratified the lease and thereby waived any right to rescind it.

> In 1992, Congress expanded the definition to include projects “permitted” by a federal
agency. Sheridan Kalorama Hist. Ass’n, 49 F.3d at 755. Even if that definition were to
apply retroactively, which it likely does not, see id. at 754-55, issuance of a lease still
would not qualify as an undertaking. The relevant federal undertaking is still approval of
the Application for Permit to Drill.

22
Mineral leases issued by the United States are governed by the basic principles of
contract law. Mobil Oil Expl. & Producing Se., Inc. v. United States, 530 U.S. 604, 607—
08 (2000) (“When the United States enters into contract relations, its rights and duties
therein are governed generally by the law applicable to contracts between private
individuals.”) (citation omitted). And a contract may be voidable as the result of mistake
if one party entered into the contract due to a mistaken factual belief. See Restatement
(Second) of Contracts §§ 152-53 (Am. L. Inst. 1981). But a party that ratifies a voidable
contract after learning of the underlying mistake waives that right. Jd. at § 7 (“A voidable
contract is one where one or more parties have the power, by a manifestation of election to
do so, to avoid the legal relations created by the contract, or by ratification of the contract
to extinguish the power of avoidance.”) (emphasis added). These principles also bind the
Government; if the Government ratifies a previously voidable contract, it has waived any
right it may have had to later void the contract. See Godley v. United States, 5 F.3d 1473,
1476 (Fed. Cir. 1993) (a counterparty can enforce a voidable contract against the United
States if the United States subsequently ratified the contract).

The near-contemporaneous Federal Register notice announcing the regulation on
which the Government now relies reflects the same interpretation. The rule, as initially
proposed, would have rendered an improperly issued lease “cancelled,” but the
Government revised the rule to make such a lease only “subject to cancellation.” 48 Fed.
Reg. 33648, 33655 (July 22, 1983) (to be codified at 43 C.F.R. pts. 3000, 3100).

Referencing its inherent authority as reflected in Boesche, the Government noted that the

23
“modification reflects the Department of the Interior’s existing practice in considering
specific situations.”® Id.

As noted above, the Secretary has identified only two potential legal bases on which
the lease might be invalid: NEPA and NHPA. And under the Government and intervenors’
interpretation of the regulations, a lease that failed to comply with NEPA or NHPA that
was nonetheless issued is “subject to cancellation.” 43 C.F.R. § 3108.3(d). In fact, the
Government framed its decision to terminate the Lease in contractual terms, characterizing
the Lease as “voidable” in its 2016 Lease Decision. Lease Decision, A.R., Vol. X, Part 8
[Dkt. # 116-7] at 49 (SUPP.AR000391). According to the Government, the lease failed to
comply with NEPA and NHPA at the time it was issued in 1982. Jd. at 49-53. But in
1982, both the Government and the lessee, Mr. Longwell, believed that the Government
had complied with all NEPA and NHPA obligations. If that belief were inaccurate, it was
a mistake. In other words, the Lease was, at most, voidable.

However, even if the Lease were voidable in 1982, the Government waived any
right to cancellation because the Government ratified the lease after learning of the alleged
imperfection. The Government was aware of claimed violations of NEPA and NHPA no
later than 1985, when the lease was challenged on those grounds. Defs.’ Mot. for Summ.

J. at 7. But the Government formally reaffirmed the validity of the lease in 1987, 1991,

° On its face, the reference to the Government’s “existing practice” contemplates the
procedures upheld in Boesche. The Government agrees, having cited the same Federal
Register entry for the proposition that § 3108.3(d) “merely codified [the Government]’s
exercise of the Secretary’s inherent power to cancel a lease'that issued without observance
of law.” Defs.’ Mot. for Summ. J. at 22. Therefore, the voidability analysis under Boesche
yields the same result.

24
1992, 1993, and 2002. See Defs.’ Mot. for Summ. J. at 7-8; Letter from Donato J. Judice
to Sidney Longwell (Apr. 19, 2002), App. Vol. I, Part 7 [Dkt. # 45-6] at 55 (FS 002811).
As to NEPA, in 1990, the Department issued a 982-page, full-blown EIS that considered
and definitively resolved any infirmities under that statute. See Final Environmental
Impact Statement for Exploratory Oil and Gas Wells (Oct. 1990), App. Vol. I, Part 1 [Dkt.
# 45-3] at 1 et seg. (FS 001165); see also Pls.’ Mot. at 51.

Nor is there any question whether the Government has failed to comply with NHPA.
As an initial matter, even if the EIS did not conclusively satisfy the Government’s NHPA
obligations, the Government also went on to complete multiple cultural inventories,
consultations with impacted Native American tribes, and in-depth studies conducted by
ethnographers in considering the pending APD. Lease Decision, Administrative Record
(“A.R.”) Vol. X, Part 8 [Dkt. # 116-7] at 46-47 (SUPP.AR000388-89). During the
intervening years—more than three decades—Solenex (and its predecessors in interest)
were barred from taking any action that could cause any “adverse effects” within the
meaning of NHPA. Finally, the Government represented to this Court in 2015 that, while
it believed that “the Lease was issued prematurely” in violation of NEPA and NHPA, “‘the
NHPA procedural defect has now been corrected by completing the consultation process.”
Response to Court Order [Dkt. # 58] at 5 (emphasis added).

According to the Government, Solenex is precluded from even raising these
arguments in this suit because the cancellation of the Lease was an exercise of inherent
authority rather than contractual authority, and any claims sounding in contract should be

brought in the Court of Federal Claims. Defs.’ Mot. for Summ. J. at 45-46. As to the first

25
argument, it was the Government, not Solenex, that initially characterized the cancellation
in contractual terms by characterizing the Lease as “voidable” in the Lease Decision. Lease
Decision, A.R., Vol. X, Part 8 [Dkt. # 116-7] at 49 (SUPP.AR000391). The Government

‘implicitly concedes as much in its argument, writing “the Lease remained voidable”
because “the errors had not been corrected.” Defs.’ Mot. for Summ. J. at 39. Having
framed the Secretary’s decision in contractual language, the Government cannot preclude
Solenex from arguing on those terms. And with respect to this Court’s jurisdiction, the
argument that the Tucker Act bars Solenex from raising these arguments in this proceeding
is groundless. Solenex seeks less than $10,000 in damages, so jurisdiction over its claim to
vacate the Secretary’s decision rightly lies in district court. 28 U.S.C. §§ 1331, 1346(a)(2);
see also Compl. [Dkt. # 151] at 62-63.

If it ever held any right to void the Lease, the Government waived that right by
correcting any outstanding deficiencies and therefore ratifying the lease. As such, the lease
was not voidable in 2016 when the Lease Decision was issued.

D. The Secretary acted without authority in cancelling the lease

The Court must “hold unlawful and set aside” any agency action “not in accordance
with law.” 5 U.S.C. § 706(2), (2)(A). And the Court may uphold agency action only for
the reasons the agency provided in taking that action. Michigan, 576 U.S. at 758. The
only basis for rescission of the lease was the Government’s legal conclusion that issuance

of the lease violated NEPA and NHPA.’ For the reasons previously discussed, that

’Intervenors, although not the Government, also argue that a 2006 law withdrawing
the Badger-Two Medicine area from mineral leasing precludes the Secretary from

26
decision was predicated on an incorrect interpretation of the law. Therefore, it must be set
aside.
II. The Secretary’s revocation of the APD must be set aside

The rescission of the APD in the Lease Decision also must be set aside as arbitrary
and capricious. The Secretary identified three grounds for rescission: the invalidity of the
underlying lease, a finding that impacts to Tribal cultural resources “cannot be fully
mitigated,” and a finding that “validation of the lease would be inconsistent with” the 2006
legislation. Lease Decision, A.R. Vol. X, Part 8 [Dkt. # 116-7] at 54 (SUPP.AR000396).
The first and third premises cannot support the Secretary’s decision because they are wrong
as a matter of law for the reasons explained above. 5 U.S.C. §§ 706(2), (2)(A). As to the
second, the Secretary’s determination that the adverse effects to Tribal cultural resources
could not be mitigated was predicated on the Government’s designation of a 165,000-acre
“Area of Potential Effects” and the decision to recognize “adverse effects” not
contemplated in NHPA’s implementing regulations. Those decisions were arbitrary and
capricious because the Government: (1) considered improper factors, (2) failed to consider
an important aspect of the problem, and (3) offered an explanation that ran counter to the
record. Motor Vehicle Mfrs. Ass’n of U.S., Inc., v. State Farm Mut. Auto. Ins. Co., 463

USS. 29, 43 (1983). Having done so, the Government’s withdrawal of the approval of the

validating the Lease. Def.-Ints.” Mot. at 22-23. It does not. As Solenex notes, the
withdrawal of those lands from future leases was made “[s]ubject to valid existing rights.”
Tax Relief & Health Care Act of 2006, Pub. L. 109-432, § 403, 120 Stat. 2922, 109th Cong.
2nd Sess. (2006). The lease was valid for the reasons already noted, so Solenex held “valid
existing rights.”

Di
APD was invalid and must be vacated. Michigan, 576 U.S. at 758 (citing SEC v. Chenery
Corp., 318 U.S. 80, 87 (1943)).

A. The designation of a 165,000-acre Area of Potential Effects was
arbitrary and capricious

The Government’s decision to designate the entire 165,000-acre TCD as the APE
for its NHPA analysis was arbitrary and capricious because it failed to consider an
important aspect of the problem and is not supported by the record.

The Secretary’s failure to evaluate adverse effects caused by the relevant
“undertaking” in establishing the APE render her decision as arbitrary and capricious. The
Government argued that the entire TCD was properly designated as the APE because the
Forest Archeologist appropriately considered the Blackfeet Tribal Historic Preservation
Officer’s explanation that the entire TCD “possesses spiritual and religious power for the
Blackfeet.” Defs.’ Mot. for Summ. J at 51. But this justification is not “influenced” by the
“nature of the undertaking”; it relies entirely on the existence of the TCD without regard
for the nature of the proposed activity. Other tribunals have rejected such an expansive
approach, finding that reliance on the mere existence of a TCD to reject a permit for energy
development is insufficient: “NHPA does not require absolute protection for a [TCD].”
Earth Power Resources, Inc., 181 IBLA 94, 111 (2011).

The Government knows how to define an appropriate APE for a proposed oil
drilling site that considers the “nature of the undertaking.” Indeed, it had already done so
in this case, establishing an approximately 5,000-acre APE in mid-2003 that accounted for

visual, audible, and emissions-based effects of Solenex’s proposed venture on the

28
surrounding area. Some version of this APE remained in effect as late as January 2014,
only two months before the designation of the entire TCD as the APE. See Map of Badger-
Two Medicine Traditional Cultural District, Solenex LLC APD and Area of Potential
Effects (Jan. 29, 2014), App. Vol. II, Part 1 [Dkt. # 45-7] at 90 (FS 004742). The original
APE identified the precise locations of the roads, well pads, and other equipment that
would be constructed and operated in the course of Solenex’s venture. Forest Service
Memorandum regarding The Area of Potential Effect (APE), Longwell Consultation, App.
Vol. II, Part 1 [Dkt. # 45-7] at 41-42 (FS 003785-86). The Government then calculated
the maximum distance at which an observer could see, hear, or smell those operations. Jd.;
Letter re: 106 Consulting Process, App. Vol. V, Part 2 [Dkt. # 48-2] at 74-75 (FS 003730-
31). That outer perimeter, plus a buffer zone, constituted the original, smaller APE. Letter
re: 106 Consulting Process, App. Vol. V, Part 2 at 74-75 (FS 003730-31) The Forest
Service’s analysis revealed that only a small fraction of the larger TCD would plausibly be
affected by Solenex’s proposed drilling activities. See id. at 77-78 (FS 003733-34); Map
of Badger-Two Medicine Traditional Cultural District Solenex LLC APD and Area of
Potential Effect, App. Vol. II, Part 1 [Dkt. # 45-7] at 90-91 (FS 00474243). Those adverse
effects—physical effects that can be seen, heard, or smelled—are precisely the kinds of
potential harms contemplated in the NHPA’s implementing regulations, and the
Government properly considered them in establishing the APE. See 36 C.F.R. § 800.5(a)
(defining and providing examples of “adverse effects’); id. at § 800.16(d) (defining “Area
of potential effects” as “the geographic area or areas within which an undertaking may

directly or indirectly cause” different kind of effects).

29
Conceding that direct physical effects alone cannot explain the expanded APE, the
Government and intervenors argue that the Government properly considered “indirect and
cumulative effects” of the Solenex venture. Defs.’ Mot. for Summ. J. at 51; see also Def.-
Int.’s Mot. at 40. But in announcing the expanded APE in early 2014, the Forest Service
did not even attempt to establish a linkage between that larger APE and the Solenex
undertaking, the physical ramifications of which had been well-established for more than
a decade by that point. See Determination of Adverse Effects, App. Vol. XI [Dkt. # 177]
at 286-87 (FS 006535-36). Nor could it have. Instead, the Forest Service adopted
wholesale the Blackfeet Tribe’s position that allowing the Solenex venture had “the
potential to adversely affect the power and spirituality of the entire district” without
explaining what those effects were or how they flowed from Solenex’ proposal.
Memorandum from Mark Bodily, Forest Archeologist (Apr. 3, 2014) [Dkt. # 177] at 237
(FS 006398). The State Historic Preservation Officer (“SHPO”) expressly conceded that
the smaller APE addressed physical effects, writing that “[t]he [Forest Service] has noted
and correctly proposed different APE areas for direct ground disturbance, visuals and
auditory effects.” Letter from Stan Wilmoth, SHPO, to Mark Bodily, U.S. Forest Serv.
(Feb. 26, 2014), App. Vol. XI [Dkt. # 177] at 232 (FS 006387). (emphasis added). But
the SHPO went on to assert that the Solenex venture could compromise the “values and
characteristics of the larger entity: the Traditional Cultural District as a whole.” Jd. Again,
that argument does not relate to the nature of the proposed undertaking. Nor, as explained
in greater detail below, did the NHPA consultations identify any adverse effects recognized

in the regulations.

30
Seeking to justify the changed APE, the Government claims that it is supported by
new information available to the Forest Service in the form of a 2012 ethnographic study
of the area. See Defs.’ Mot. for Summ. J. at 52; Def.-Int.’s Mot. at 40. The record reflects
that the Government did, in fact, rely on that study in reaching its conclusion. See Lease
Decision, A.R., Vol. X, Part 8 [Dkt. # 116-7] at 46 (SUPP.AR000388). But that study
itself limited the “area of potential effects of the Longwell lease” to the “headwaters of the
South Fork of Two Medicine River.” Badger-Two Medicine Traditional Cultural District,
Lewis & Clark National Forest, Montana: Boundary Expansion Study, App. Vol. XI [Dkt.
# 177] at 88. By its own terms, that does not refer to the entire 165,000-acre APE.
According to the same study, the TCD includes, in addition to the headwaters of the South
Fork of Two Medicine River, other geographic features such as Badger Creek, Mowitch
Basin, Birch Creek, and passes across the Continental Divide. Jd. at 50-52. Maps of the
TCD prepared by the Forest Service reveal that those geographic features are separated
from the Lease by miles of rugged terrain. See Map of Badger-Two Medicine Traditional
Cultural District, Solenex LLC APD and Area of Potential Effect (Jan. 29, 2014), App.
Vol. II, Part 1 [Dkt. # 45-7] at 90 (FS 004742). When considered alongside the Forest
Service’s 2003 adverse effects analysis, the record simply does not support the
Government’s sweeping finding that “impacts to Tribal cultural resources”—across the
entire TCD—‘cannot be mitigated.”

B. The adverse effects determination was arbitrary and capricious
The Government found that approving Solenex’s APD had “the potential to

adversely affect the power and spirituality of the entire district.” Memorandum from Mark

31
Bodily, Forest Archeologist (Apr. 3, 2014) [Dkt. # 177] at 237 (FS 006398). Because the
Government improperly considered prospective harms that are not “adverse effects” within
the meaning of the NHPA and its implementing regulations, that determination was also
arbitrary and capricious.

NHPA does not define “adverse effects.” Nonetheless, the Government has since
issued regulations to define that term. See 36 C.F.R. § 800.5(a), (a)(2)(i)-(vii). And the
Government is bound by its own regulations. Mead Data Cent., Inc. v. U.S. Dep’t of Air
Force, 566 F.2d 242, 258 (1977). The relevant regulations identify seven categories of
“adverse effects” that the Government must consider in evaluating the impacts to “historic
properties within the area of potential effects.” 36 C.F.R. § 800.5(a), (a)(2)(@i)(vii). Six
of the seven examples of adverse effects relate to quantifiable and objective changes to the
physical environment. Jd. § 800.5(a)(2)(i) (“Physical destruction”); id. § 800.5(a)(2)(i)
(“alteration”); id. § 800.5(a)(2)(iii) (“removal”); id. § 800.5(a)(2)(iv) (“change of
the ... property’s use or of physical features”); id. § 800.5(a)(2)(v) (“Introduction of
visual, atmospheric or audible elements”); id. § 800.5(a)(2)(vi) (“Neglect of a property
which causes its deterioration”). The seventh relates to loss of federal control over the
property “without adequate and legally enforceable restrictions or conditions to ensure
long-term preservation of the property’s historic significance.” Jd. at § 800.5(a)(2)(vi1).

The regulations also grant the Government latitude to consider types of adverse
effects not expressly identified, 36 C.F.R. § 800.5(a)(2), but, by choosing to provide a
lengthy list of prototypical examples of “adverse effects,” the Government cabined its

discretion as to the kinds of potential harms that qualify. The fact that every enumerated

32
example describes a physical effect on the historic property suggests that the regulations
contemplate only those harms. And the Government and intervenors have identified no
authority for the proposition that the Government may consider factors that are impossible
to physically observe or measure. In fact, the Government has rejected the suggestion that
similar disturbances qualify as “adverse effects” in the past, finding that deer hunting near
Gettysburg National Military Park would not cause any adverse effects because the
disturbance of the “quiet contemplative atmosphere” at the battlefield was not an “adverse
factor” under the NHPA. Davis v. Latschar, 83 F. Supp. 2d 1, 14 (D.D.C. 1998), aff'd,
202 F.3d 359 (D.C. Cir. 2000).

The Government argues that the Forest Service properly considered “both
subjective and objective” factors “in its direct, indirect, and cumulative impacts analyses.”
Defs.’ Mot. for Summ. J. at 57. According to the Government, this is permissible because
the regulations contemplate the “effects of an undertaking on the ‘integrity of the property’s
location, . . . feeling, or association.’” Jd. (quoting 36 C.F.R § 800.5(a)(1)). But, for the
reasons explained above, the subjective factors the Government considered—factors like
“power” and “spirituality’—are categorically distinct from the types of factors
contemplated by the regulations. These concerns are not new: public comments to the
proposed definition of “adverse effects” yielded concerns that “feeling” and “association”
were “impermissibly vague and overbroad terms.” 65 Fed. Reg. 77698, 77707 (Dec. 12,
2000). Responding to those and similar comments, the Government maintained that those

terms would only be interpreted within the scope of their meaning as defined in National

33
Register Bulletin 15, writing “adverse criteria are linked specifically to objective National
Register criteria published by the National Park Service.” Jd.

Turning to National Register Bulletin 15, it is apparent that the Government has
erred in this case by adopting freewheeling, inherently subjective definitions of those terms
unmoored from their grounding in physically verifiable effects. The Bulletin recognizes
“feeling” and association” as two of the seven elements of integrity, but notes: “Like
feeling, association requires the presence of physical features that convey a property’s
historic character.” U.S. Dep’t of the Interior, National Park Serv., National Register
Bulletin 15 (1997), _ https://www.nps.gov/subjects/nationalregister/upload/NRB-
15_web508.pdf at 45 (emphasis added). The Bulletin goes on to state, “Because feeling
and association depend on individual perceptions, their retention alone is never sufficient
to support eligibility of a property for the National Register.” Jd. (emphasis in original).
Moreover, each of the four steps the National Park Service prescribes to “Assess[ ]
Integrity in Properties” expressly or implicitly references the “essential physical features”
of the property. Id. Nor do the Government’s guidelines make an exception for Native
American sites in this regard. The Bulletin also provides specific guidance related to
defining Native American sites that may be eligible for inclusion due to their association
with “Traditional Cultural Values.” Jd. at 26. The Park Service notes that “It is critical,
however, . . . that the associations not be so diffuse that the physical resource cannot be
adequately defined.” Jd. at 27. But in this case, that is exactly what the Government did!

By adopting a broad definition of “adverse effects” unmoored from both the language of

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the regulations and its conceptual underpinnings, the Government considered improper
factors and was therefore arbitrary and capricious. See State Farm, 463 U.S. at 43.

The Government did not find that Solenex’s proposed drilling would cause any
adverse effects recognized by the regulations. Lease Decision, A.R. Vol. X, Part 8 [Dkt.
# 116-7] at 47 (SUPP.AR000389); see also Memorandum from Mark Bodily, Forest
Archeologist (Apr. 3, 2014) [Dkt. # 177] at 237 (FS0056398). Nor would the record have
supported such a finding. Indeed, the Blackfeet never claimed that the Solenex drilling
operation would cause those kinds of adverse effects. Letter from John Murray, Blackfeet
Tribe THPO, to Mark Bodily, U.S. Forest Serv. (Feb. 28, 2014) [Dkt. # 177] at 234 (FS
006894). And while I do not dispute the sincerity of the belief that “ANY oil and gas
exploration venture by Solenex will negatively and cumulatively affect the religious and
cultural quality of the expanded district,” that assertion does not identify an “adverse effect”
recognized by the NHPA regulations. /d.; see also Amicus Br. at 2.

The Government’s identification of the entire 165,000-acre TCD as the relevant
APE and its recognition as relevant adverse effects a variety of harms not contemplated by
the regulations were arbitrary and capricious. Therefore, the disapproval of the APD must

be vacated.

CONCLUSION
For the reasons given above, it is time to put an end to this interminable, and
insufferable, bureaucratic chess match. The Court finds that the Secretary lacked authority

to rescind the Lease, and that the Secretary further acted in an arbitrary and capricious

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manner in disapproving the previously approved Application for Permit to Drill.
Accordingly, Plaintiff Solenex LLC’s Motion for Summary Judgment [Dkt. # 156] will be
GRANTED, the Government’s Cross-Motion for Summary Judgment [Dkt. # 164] will be
DENIED, and intervenors’ Motion for Summary Judgment [Dkt. # 162] will be DENIED.

An Order consistent with this Memorandum Opinion will issue on this date.

‘\

RICHARD J.
United States District Judge

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