Amax Land Company v. Quarterman, Cynthia

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 10, 1999 Decided July 16, 1999

No. 98-5367

Amax Land Company,
Appellee

v.

Cynthia Quarterman, Director,
Minerals Management Service, et al.,
Appellants

Appeal from the United States District Court
for the District of Columbia
(96cv01839)

Robert L. Klarquist, Attorney, United States Department
of Justice, argued the cause for appellants. With him on the
briefs were Lois J. Schiffer, Assistant Attorney General, and
Andrew C. Mergen, Attorney.

Thomas R. Lundquist argued the cause and filed the brief
for appellee.

 Harold P. Quinn, Jr., L. Poe Leggette, and Glenn S.
Benson were on the brief for amicus curiae National Mining
Association.

Before: Silberman, Henderson, and Garland, Circuit
Judges.

Opinion for the Court filed by Circuit Judge Silberman.

Silberman, Circuit Judge: Amax Land Company, a lessee
of federally owned coal-containing land, challenges the legali-
ty of a regulation adopted by the Minerals Management
Service (MMS) and a payment order issued pursuant thereto.
The regulation assesses interest on late coal lease payments
at a higher rate than the government can earn on investments
of its short term operating cash, and was interpreted by
MMS in the payment order to allow that higher rate to
fluctuate from month to month and to authorize the assess-
ment of compound interest (i.e., interest on interest). The
district court concluded the regulation was ultra vires insofar
as it established the higher rate, and set aside the regulation
and the payment order. We disagree and hold that the
general rulemaking provisions found in MMS' organic stat-
utes countenance assessing the higher rate so long as that
rate satisfies the criteria imposed by those general rulemak-
ing provisions; we remand for the district court to make this
determination. We agree, however, with the district court's
conclusions on the questions of shifting interest rates and
compound interest. The Debt Collection Act (DCA) plainly
forbids the utilization of shifting interest rates, and its imple-
menting regulations (the Federal Claims Collection Stan-
dards), while perhaps not as unambiguous on the matter of
compound interest, are most sensibly interpreted to preclude
that practice as well.

I.

A.

Under the Mineral Lands Leasing Act of 1920 (MLLA) and
other statutes, MMS (a subdivision of the Department of the
Interior) leases federal and Indian lands containing coal, oil,

and other resources to private entities for exploration and
extraction.1 In exchange, lessees of federal land remit royal-
ties and other rental payments to the government, of which
50% is disbursed to the state in which the land is located (90%
in the case of Alaska). 30 U.S.C. s 191 (1994). Lessees of
Indian land remit similar payments to the government, acting
as trustee for the Indians; the entirety is then conveyed to
the Indians. Gov't Br. 11 n.7. The size of the royalty
payments is determined by statutory formulae. On coal
leases, for example, lessees must pay "a royalty in such
amount as the Secretary shall determine of not less than 121/2
per centum of the value of coal as defined by regulation,
except the Secretary may determine a lesser amount in the
case of coal recovered by underground mining operations."
30 U.S.C. s 207(a) (1994).

The agency's determination of that amount not surprisingly
gives rise to disputes from time to time (mainly appeals to
higher levels of the agency) between MMS and the lessee. If
the dispute is resolved favorably to MMS after the due date,
and if the lessee has timely remitted only a payment based on
its own estimate of the coal's value, the lessee will be late on
part of its royalty payment obligation--to fully compensate
MMS and the states or Indians, the lessee would have to
remit the late portion plus interest on that amount. On the
other hand, if the lessee were to pay the full amount demand-
ed by the agency prior to appeal and subsequently win the
appeal (hence making an overpayment), the lessee would
receive a refund only of the excess portion, not interest on
that amount. That is because Congress has not expressly
provided by statute or contract for recovery of interest
against the government, and in the absence of such a waiver
of sovereign immunity, interest cannot be awarded against
the United States. See Library of Congress v. Shaw, 478
U.S. 310, 314-17 (1986). Recognizing this asymmetry, lessees

__________
1 See MLLA, 30 U.S.C. ss 181 et seq. (1994); Mineral Leasing
Act for Acquired Lands, 30 U.S.C. ss 351 et seq. (1994); 25 U.S.C.
ss 396, 396a-396g (1994) (Indian allotted and tribal lands).

involved in a good-faith royalty dispute typically will timely
pay only their lower estimate of the royalty payment.

To address the typical underpayment situation, MMS in
1980 adopted regulations assessing interest on underpay-
ments on leases of resource-containing lands at the current
value of funds (CVF) rate. See 45 Fed. Reg. 84,762, 84,764
(1980) (interim regulations); 47 Fed. Reg. 22,524, 22,527
(1982) (final regulations). The CVF rate is a rate prescribed
by the Treasury Department, by reference to prevailing
market rates, for short-term investments of the federal gov-
ernment's operating cash. See 31 U.S.C. s 323 (1994). Con-
sequently, an award based on the CVF rate compensates the
government for its lost opportunity to make short-term in-
vestments due to the late payment of a debt.

In 1983, Congress imposed a higher rate by statute--but
only for oil and gas leases, not geothermal or solid mineral
leases (such as coal leases). See Federal Oil and Gas Royalty
Management Act (FOGRMA), Pub. L. No. 97-451, Title I,
s 111(a), 96 Stat. 2447, 2455 (1983) (codified at 30 U.S.C.
s 1721(a) (1994)). (Congress explicitly deferred legislation on
coal leases until MMS studied the matter and filed a report,
see id. at s 303, 96 Stat. at 2461 (codified at 30 U.S.C.A.
s 1752 note (1986)).) The rate chosen for oil and gas leases
was the so-called "IRS rate" already in use for underpayment
of taxes pursuant to 26 U.S.C. s 6621(a)(2) (1994): the mar-
ketable rate for treasury bonds of less than three years
maturity, to be determined monthly, plus three percentage
points. Roughly speaking, this rate tends to be 3% higher
than the CVF rate. The agency adopted a new implementing
regulation for oil and gas leases assessing interest at the IRS
rate, see 49 Fed. Reg. 37,336, 37,346-47 (1984) (codified at 30
C.F.R. ss 218.54, 218.55 (1999)), while continuing to assess
interest on coal lease underpayments at the CVF rate.

By 1993, the agency came to view the CVF rate as an
inadequate response to the underpayment problem on coal
leases. Not only did the agency see that rate as insufficient
to compensate it and the states or Indians for lost investment
income on the late portion of the royalty payments on the

leases, it believed the CVF rate actually caused underpay-
ment in the first place because the lessee had an incentive to
withhold payment, invest the amount withheld, and remit
payment to MMS at a later date, pocketing the spread
between the lessee's investment rate of return and the CVF
rate. A higher rate was thought necessary, and following the
model of its regulation on oil and gas leases, the agency
settled on the IRS rate, which would "serve as an effective
deterrent to discourage late and underpayments" and "fairly
compensate the Federal Government ... States, Indian
tribes and allottees, and other recipients ... for the lost time
value of money." 59 Fed. Reg. 14,557, 14,557 (1994) (codified
at 30 C.F.R. s 218.202(c)-(d) (1999)). As authority, the agen-
cy invoked the general rulemaking provisions found in the
several organic statutes it administers, particularly MLLA
s 32, which provides that "[t]he Secretary of the Interior is
authorized to prescribe necessary and proper rules and regu-
lations and to do any and all things necessary to carry out
and accomplish the purposes of this chapter." 30 U.S.C.
s 189 (1994).2

B.

Amax Land Company is the successor-in-interest to a 1965
lease of certain federal coal-containing lands in Wyoming.

__________
2 See also 30 U.S.C. s 359 (1994) ("The Secretary of the
Interior is authorized to prescribe such rules and regulations as are
necessary and appropriate to carry out the purposes of this chapter,
which rules and regulations shall be the same as those prescribed
under the mineral leasing laws to the extent that they are applica-
ble."); 25 U.S.C. s 396 (1994) ("[T]he Secretary of the Interior is
authorized to perform any and all acts and make such rules and
regulations as may be necessary for the purpose of carrying the
provisions of this section into full force and effect[.]") (leases of
allotted Indian lands); 25 U.S.C. s 396d (1994) ("All operations
under any oil, gas, or other mineral lease issued pursuant to the
terms of sections 396a to 396g of this title or any other Act affecting
restricted Indian lands shall be subject to the rules and regulations
promulgated by the Secretary of the Interior.") (leases of unallotted
Indian lands).

Amax's troubles began in 1985 when the agency invoked its
right under the lease to readjust the royalty rate from one
based on the weight of the coal produced (171/2 cents per ton)
to one based on the value of the coal produced (121/2% of the
value of the coal produced by strip or auger methods and 8%
of the value of coal produced by underground methods).3
The switch from weight to value as the metric for computing
royalty payments created uncertainty for Amax, which had
begun to utilize coal drying processes to increase the BTU
content (and hence the value) of the coal it mined. Amax
explained its methodology for determining value to MMS in a
1989 letter and submitted payments accordingly. But in
1994, the agency informed Amax that the coal had been
revalued and that additional royalties would be assessed
retroactively for the period between January 1989 and July
1993. On September 23, 1994, Amax paid the principal
underpayment amount of $35,706.38. Then, in a payment
order, MMS assessed Amax $9,044.78 in interest on this
principal, calculated as follows: Between March 1989 and
April 1, 1994, MMS employed the CVF rate (which fluctuated
from month to month), in accordance with the regulation in
force at the time, computed as simple interest. Between
April 1, 1994--the effective date of MMS' regulation adopting
the IRS rate for coal leases--and the payment of the princi-
pal on September 23, 1994, the agency charged interest at the
IRS rate (which again fluctuated from month to month),
compounded daily.

After an unsuccessful administrative appeal, Amax filed
suit in the district court, seeking invalidation of the 1994
regulation and the payment order. See Amax Land Co. v.
Quarterman, Civ. Act. No. 96-1839, 1998 WL 306582 (D.D.C.

__________
3 The agency's modification of the lease was in response to the
Federal Coal Leasing Amendments Act, Pub. L. No. 97-377, s 6(a),
90 Stat. 1083, 1087 (1976) (codified at 30 U.S.C. s 207(a)), which
amended the MLLA to provide that "[a] lease shall require pay-
ment of a royalty in such amount as the Secretary shall determine
of not less that 121/2 per centum of the value of the coal as defined by
regulation, except the Secretary may determine a lesser amount in
the case of coal recovered by underground operations."

June 3, 1998). Amax contended that MMS lacked authority
to assess the IRS rate of interest, to allow the rate to shift
from month to month, and to charge compound interest. The
district court agreed. The court first held that the regulation
was ultra vires insofar as it adopted the IRS rate, reasoning
that Congress' 1982 legislation imposing the IRS rate only on
oil and gas lease underpayments, while deferring legislation
on coal leases until MMS had studied the matter and pro-
posed or requested new legislation (which never occurred),
implies that Congress understood MMS to possess authority
merely to assess the CVF rate on coal lease underpayments.
The court concluded that although neither the MLLA nor
FOGRMA expressly speaks to the issue of interest on late
coal lease payments, the agency's reading of MLLA s 32 was
unreasonable under step II of Chevron U.S.A. Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 842-45 (1984).
See Amax Land Co. 1998 WL 306582, at *6. The district
court next turned to the question of MMS' authority to
employ shifting rates and to assess compound interest, which
the court thought answered by the Standards (regulations
establishing uniform cash management practices for all feder-
al agencies) promulgated under the Debt Collection Act of
1982 (DCA), Pub. L. No. 97-365, 96 Stat. 1749 (codified as
amended at 31 U.S.C. ss 3701 et seq. (1994 & Supp. II 1996)),
which provide that "[t]he rate of interest, as initially assessed,
shall remain fixed for the duration of the indebtedness" and
that "[i]nterest should not be assessed on interest," 4 C.F.R.
s 102.13 (c) (1999). See id. at *6-7. Accordingly, the district
court granted summary judgment in favor of Amax, invalidat-
ing the regulation and the payment order.

II.

The agency urges us to defer under Chevron to its inter-
pretation of the general rulemaking provisions of its organic
statutes as providing ample authority to assess the IRS rate,
to allow that rate to shift over time, and to assess compound
interest. Amax responds that Congress' 1982 enactment
concerning oil and gas leases, the common law of interest, or

both, indicate Congress' unambiguous intent to limit the
agency to a compensatory rate (which Amax assumes to be
the CVF rate). Moreover, it is argued that the agency has
departed from its earlier interpretation of its organic statutes
without sufficient explanation, and--even apart from the al-
leged switch--that the agency's current approach is arbitrary
and capricious. And Amax submits that the questions of
shifting rates and compound interest are readily resolved, as
the district court concluded, by reference to the Debt Collec-
tion Act and the implementing Standards.

We think Amax's common law argument-that the federal
common law permits the government to recover no more than
a compensatory rate (Amax argues the IRS rate is a punitive
rate), and hence constrains the agency's otherwise broad
authority under its organic statutes--can be disposed of handi-
ly. Assuming the common law imposes a restraint on an
agency's statutory interpretation in a post-Chevron era, see
Michigan Citizens for an Indep. Press v. Thornburgh, 868
F.2d 1285, 1292-93 (D.C. Cir.) (distinguishing canons that
embody a policy choice and should not be employed by a
reviewing court at Chevron step I or II from canons designed
to discern Congress' intent that are appropriately used at
Chevron step I), aff'd by an equally divided Court, 493 U.S.
38 (1989), and assuming the common law rule is as Amax
describes it (the government characterizes the common law
rule as applying only to a federal court's equitable powers,
not to interest demands grounded in an administrative regu-
lation), it is an anachronism to speak of the federal common
law of interest since Congress' enactment of the DCA in 1982.
That statute "changed the common law" by making mandato-
ry the federal government's common law right to assess
interest on private persons' overdue obligations to the gov-
ernment. United States v. Texas, 507 U.S. 529, 534 n.4
(1993). It also "speak[s] directly," United States v. Bestfoods,
118 S. Ct. 1876, 1885 (1998) (quoting Texas, 507 U.S. at 534),
to the question of setting an interest rate, thereby supplant-
ing any guidance the common law may have provided on this

point: "The head of an executive, judicial, or legislative
agency shall charge a minimum annual rate of interest on an
outstanding debt on a United States Government claim owed
by a person that is equal to [the CVF rate]." 31 U.S.C.
s 3717(a)(1) (Supp. II 1996) (emphasis added).4 Thus, the
DCA plainly provides authority for an agency to decide what
rate is compensatory or even to impose a greater-than-
compensatory rate.

To be sure, MMS did not rely on the DCA when it
published the regulation challenged here (perhaps because
that could have negative consequences with respect to the
agency's claimed exemption from the DCA regarding the
compound interest and shifting rate issues, which we discuss
below), and its response before us to Amax's common law
argument likewise does not rely on the DCA. But the
government does claim that the common law does not apply
to it, and our reading of Texas and the DCA--which of course
have been cited to us in other respects--convinces us that
these authorities obviously support the government's claim.
Whether or not a federal court should exercise its discretion
to entertain a logically antecedent legal claim not made by a
party, see United States Nat'l Bank v. Independent Ins.
Agents of Am., Inc., 508 U.S. 439 (1993), a court may certain-
ly consider any legal authority that bears on an argument
that is made, see Independent Ins. Agents of Am., Inc. v.
Clarke, 955 F.2d 731, 743 (D.C. Cir. 1992) (Silberman, J.,
dissenting) (discussing Kamen v. Kemper Fin. Servs., Inc.,

__________
4 When Texas was decided, the DCA provided that the term
" 'person' does not include an agency of the United States Govern-
ment, of a State government, or of a unit of general local govern-
ment." 31 U.S.C. s 3701(c) (1994). The Supreme Court held that
Congress' explicit limitation of the DCA in this manner did not
indicate that Congress had directly spoken to the common law rule
allowing the federal government to recover compensatory interest
from a local government as debtor, see, e.g., Board of Comm'rs of
Jackson County v. United States, 308 U.S. 343 (1939), and hence
that this aspect of the common law did survive the DCA. See
Texas, 507 U.S. at 535. The DCA has since been amended to
include states and local governments. See Pub. L. No. 104-134,
s 31001(d)(1), 110 Stat. 1321, 1321-359 (1996).

500 U.S. 90 (1991)), rev'd on other grounds, 508 U.S. 439
(1993), especially when such legal authority has already been
brought to the court's attention, cf. Carducci v. Regan, 714
F.2d 171, 177 (D.C. Cir. 1983).

The FOGRMA statute, on which the district court relied,
presents more difficult questions. Obviously if FOGRMA,
properly construed, revealed a congressional intent that the
agency not be authorized to charge the IRS rate it could not
be thought "necessary and proper" under MLLA s 32 to do
so. The government properly objects to the district court's
conclusion that "FOGRMA ... makes it clear that Congress
itself did not believe that the MLLA ever provided sufficient
authority for the department to charge the IRS rate." (em-
phasis added). That assertion runs afoul of the principle that
a later Congress' interpretation of what an earlier Congress
intended carries no particular weight--when used for that
purpose alone. A later Congress' views can be relevant,
however, in interpreting the meaning of its own duly enacted
legislation. See generally United States ex rel. Long v. SCS
Bus. & Tech. Inst., Inc., 173 F.3d 870, 881 n.15 (D.C. Cir.
1999) (collecting cases). And this seems to be the nature of
Amax's argument, i.e., that the FOGRMA Congress' under-
standing of the agency's interest authority under the MLLA
illuminates what the FOGRMA Congress intended in restrict-
ing FOGRMA to oil and gas leases and deferring legislation
on coal leases until the agency's completion of a report. If we
agreed with Amax's interpretation of FOGRMA, that statute
itself--wholly apart from the MLLA--would limit the agen-
cy's interest authority on coal leases.

We start with FOGRMA's text. Section 111(a) provides
that "[i]n the case of oil and gas leases where royalty pay-
ments are not received by the Secretary on the date that such
payments are due, or are less than the amount due, the
Secretary shall charge interest on such late payments or
underpayments at the [IRS rate]." 30 U.S.C. s 1721(a) (1994

& Supp. II 1996) (emphasis added). Here, and indeed
throughout FOGRMA, Congress spoke only to oil and gas
leases, notwithstanding that the original Senate bill would
have extended to leases of all mineral resources. See S. Rep.
No. 97-512, at 11 (1982) (noting that Senate bill had been
amended in committee to cover only oil and gas leases).
Reading s 111 together with Congress' stated purpose to
"expand ... the authorities and responsibilities of the Secre-
tary of the Interior to implement and maintain a royalty
management system for oil and gas leases on Federal lands,"
30 U.S.C. s 1701(b)(2) (emphasis added), Amax infers that
Congress demonstrated that legislation was necessary to
authorize the agency to impose the IRS rate on oil and gas
lease underpayments, and that Congress' omission of such
legislation for coal leases evinces its intent to prohibit the
agency from assessing the IRS rate in that context.

Amax also directs us to the one provision of FOGRMA
where Congress did address coal leases. That section pro-
vides:

The Secretary shall study the question of the adequacy
of royalty management for coal, uranium and other ener-
gy and nonenergy minerals on Federal and Indian lands.
The study shall include proposed legislation if the Secre-
tary determines that such legislation is necessary to
ensure prompt and proper collection of revenues owed to
the United States, the States and Indian tribes or Indian
allottees from the sale, lease or other disposal of such
minerals.

s 303(a), 96 Stat. at 2461 (codified at 30 U.S.C.A. s 1752 note
(1986)). In Amax's view, this section expresses Congress'
understanding (and therefore its intent) that MMS lacks the
authority independently to adopt royalty management mea-
sures (including charging interest at the IRS rate) similar to
those imposed by FOGRMA on the agency for oil and gas
leases. Such authority on coal leases, we are told, could only
come from Congress, and presumably only after the request-
ed report on coal royalty management had been submitted
pursuant to s 303. (The agency's 1984 report concluded that

no such legislation was necessary. See U.S. Department of
the Interior, Report to the Congress of the United States on
the Adequacy of Royalty Management For Solid Minerals 18
(1984).)

Amax bolsters its textual arguments with an excerpt of
legislative history. The House Report, in describing the pre-
FOGRMA state of affairs, explained that "[t]he Federal roy-
alty management system lacks adequate enforcement tools.
Under the present system, the MMS has very limited authori-
ty to impose penalties (beyond ordinary interest charges)
even for gross, repeated underpayments of royalties." H. R.
Rep. No. 97-859, at 18 (1982), reprinted in 1982 U.S.C.C.A.N.
4268, 4272. Equating "ordinary interest charges" with the
compensatory CVF rate, appellee views this excerpt as quite
supportive of its interpretation.

The government, for its part, observes that s 111(a) is
phrased as a mandatory command--"the Secretary shall
charge interest [at the IRS rate]," 30 U.S.C. s 1721(a) (em-
phasis added)--rather than as a grant of authority. Thus,
Congress may have intended to require the IRS rate for oil
and gas leases, while leaving to the agency's discretion which
rate to impose for coal leases. The government responds
similarly to appellee's reliance on the study-and-report provi-
sion in s 303, reading that section to mean that if the agency
wanted mandatory royalty management measures imposed
on it by Congress (including the IRS rate), it could submit
such a request in the report. Accordingly, the study-and-
report command does not imply anything regarding the agen-
cy's authority to impose such measures on itself by regula-
tion.5 And whereas appellant focuses on Congress' stated
purpose to "expand" the agency's authority regarding royalty
management for oil and gas leases, see 30 U.S.C. s 1701(b)(2)
("It is the purpose of this chapter to clarify, reaffirm, expand,

__________
5 The agency appeared to assume this interpretation of s 303 in
the 1984 report submitted to Congress. See U.S. Department of
the Interior, supra, at 18 ("[A]ny additional authorities determined
to be necessary can and will be developed through modification of
internal procedures, new lease terms, or by rulemaking.").

and define the authorities and responsibilities of the Secre-
tary of the Interior to implement and maintain a royalty
management system for oil and gas leases on Federal
lands...."), the government highlights the words "clarify"
and "reaffirm," and submits that in the context of a statute
addressing so many aspects of oil and gas lease royalty
management, it is far from clear that Congress meant to link
the word "expand" in this general statement of purposes to
the one specific provision mandating assessment of the IRS
rate. Finally, the government points to FOGRMA s 304,
which provides that "[t]he penalties and authorities provided
in this chapter are supplemental to, and not in derogation of,
any penalties or authorities contained in any other provision
of law," 30 U.S.C. s 1753(a) (1994). While there may be
disagreement as to the scope of those "authorities contained
in any other provision of law," the government urges that this
section must at least mean that Congress intended FOGRMA
to have no effect on them.

Amax's s 111(a) argument, by itself, would be based on a
use of the expressio unius est exclusio alterius canon in a
context, where, as we have indicated before, it is rather
tenuous. See Cheney R.R. Co. v. ICC, 902 F.2d 66, 69 (D.C.
Cir. 1990) ("[T]he contrast between Congress's mandate in
one context with its silence in another suggests not a prohibi-
tion but simply a decision not to mandate any solution in the
second context, i.e., to leave the question to agency discre-
tion.") (emphasis in original); see also Shook v. District of
Columbia Fin. Responsibility & Management Assistance
Auth., 132 F.3d 775, 782 (D.C. Cir. 1998). But the explicit
mention of coal leases--the "alterius"--in the study-and-
report command makes the negative implication somewhat
stronger. And we agree that the legislative history is at least
supportive. Still, we cannot say that Congress directly ad-
dressed the issue before us as the first step of Chevron
requires. So we must defer to the agency's interpretation, if
reasonable. We think that, particularly in light of s 304, the
agency's interpretation passes that test, and therefore we
disagree with the district court's conclusion.

 III.

Amax alternatively argues that MMS' present view of its
rulemaking authority contradicts an earlier position taken by
Interior's Board of Land Appeals (a body that reviews the
MMS Director's adjudicatory decisions) in Shell Offshore,
Inc., 115 I.B.L.A. 205 (1990). This contention, if true, would
not of itself defeat Chevron deference, see Paralyzed Veter-
ans of Am. v. D.C. Arena L.P., 117 F.3d 579, 586 (D.C. Cir.
1997) (citing Chevron, 467 U.S. at 863), cert. denied sub nom.
Pollin v. Paralyzed Veterans of Am., 118 S. Ct. 1184 (1998),
but would, under Motor Vehicle Mfrs. Ass'n of United States,
Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 46-57
(1983), require the agency to provide a reasoned explanation
for the changed interpretation, see Smiley v. Citibank, N.A.,
517 U.S. 735, 742 (1996); Arent v. Shalala, 70 F.3d 610, 616
n.6 (D.C. Cir. 1995) (citing Rust v. Sullivan, 500 U.S. 173,
186-87 (1991)).6

__________
6 We recognize that there is some inconsistent language in the
Supreme Court's cases on the proper level of deference due an
agency's revised interpretation of a statute it administers. Com-
pare, e.g., INS v. Cardoza-Fonseca, 480 U.S. 421, 446 n.30 (1987)
("An agency interpretation of a relevant provision which conflicts
with the agency's earlier interpretation is 'entitled to considerably
less deference' than a consistently held agency view." (quoting Watt
v. Alaska, 451 U.S. 259, 273 (1981))), with Rust, 500 U.S. at 186-87
("This Court has rejected the argument that an agency's interpreta-
tion 'is not entitled to deference because it represents a sharp break
with prior interpretations' of the statute in question." (quoting
Chevron, 467 U.S. at 862)). See generally Comment, Chevron, Take
Two: Deference to Revised Agency Interpretations of Statutes, 64
U. Chi. L. Rev. 681 (1997). Although we have cited Cardoza-
Fonseca approvingly in dicta, see Huls America, Inc. v. Browner,
83 F.3d 445, 450 n.6 (D.C. Cir. 1996), we more frequently articulate
and apply the standard in analogous terms to those chosen by the
Supreme Court in its most recent statement (albeit in dicta) of the
issue in Smiley, 517 U.S. at 742, see Independent Bankers Ass'n of
Am. v. Farm Credit Admin., 164 F.3d 661, 668 (D.C. Cir. 1999)
(citing Smiley); Paralyzed Veterans, 117 F.3d at 586; Bush-
Quayle '92 Primary Comm., Inc. v. FEC, 104 F.3d 448, 453-55
(D.C. Cir. 1997); Arent, 70 F.3d at 616 n.6, and we do so here.

 But no such change has occurred here. In Shell Offshore,
the agency's Board of Land Appeals was presented with the
question whether MMS could assess interest at the IRS rate
on delinquent oil and gas lessees for periods of time prior to
Congress' explicit authorization of the IRS rate for oil and
gas leases in FOGRMA. The Board of Land Appeals held
that the MMS could only assess interest at the CVF rate for
such periods:

Although prior to the passage of 30 U.S.C. s 1721 (1982),
MMS was authorized by equity to assess interest in
order to compensate the Department for the time value
of money, the interest rate authorized by 30 U.S.C.
s 1721 (1982) is greater than necessary to compensate
for the time value of money.... Thus, although MMS
was authorized to assess interest prior to passage of
FOGRMA, it was not authorized to assess interest at the
rate specified by FOGRMA....

Shell Offshore, 115 I.B.L.A. at 212 (emphasis added) (citations
and footnote omitted). That interpretation of the agency's
interest authority may be dubious insofar it is grounded in
general notions of "equity." (Agencies, of course, are totally
creatures of statute.) But in any event, as the government
points out, the Board of Land Appeals in Shell Offshore did
not consider that MLLA s 32 or the other general rulemak-
ing provisions might furnish the authority for the agency to
assess the IRS rate. MMS' 1994 rulemaking, which express-
ly relied on those provisions, see 59 Fed. Reg. at 14,557-58,
accordingly cannot be deemed a departure.

So it is that MLLA s 32 gives the agency the authority to
reach the subject matter of interest. But not without limits:
Section 32, it will be recalled, requires that any regulations
adopted by MMS be "necessary and proper ... to carry out
and accomplish the purposes of this chapter." 30 U.S.C.
s 189. Amax, supported by the National Mining Association
as amicus curiae, contends that MMS' regulation is arbitrary
and capricious, see 5 U.S.C. s 706(2)(A) (1994)--which is
more or less the same as saying that the agency has ignored

the "necessary and proper" command.7 It is argued, for
example, that the degree of underpayment on coal leases
pales in comparison to the magnitude of underpayment on oil
and gas leases that prompted FOGRMA, so that the IRS rate
is not "necessary" to deter late payments; that the CVF rate
is adequate to deter late payments because the coal mining
industry's return on assets is lower than the CVF rate; that
most late payments result from coal lessees losing good-faith
administrative appeals rather than engaging in strategic in-
vestment behavior; and that the agency has failed to consider
an important aspect of the late payment problem, i.e., the
agency's leisurely processing of administrative appeals
(which, it is feared, may get worse once the agency stands to
receive a higher interest rate). The agency's response is
somewhat anemic. In its rulemaking statement, it dismissed
complaints about the length of the administrative appeals
process with the brusque assertion that "[t]his issue is beyond
the scope of this rulemaking" and a promise to streamline the
appeals process. 59 Fed. Reg. at 14,557. And in its brief,
the agency ignores most of the contentions advanced by
Amax and its amicus and simply says that $27 million in lost
interest revenue is not so insubstantial a sum as to make the
agency's corrective measure unnecessary or improper.

__________
7 Whether MMS' regulation is "necessary and proper" is not so
much a Chevron statutory interpretation question as an arbitrary
and capricious issue. That standard is more fitting here given the
breadth of the "necessary and proper" command. See National
Ass'n of Regulatory Util. Comm'rs v. ICC, 41 F.3d 721, 727 (D.C.
Cir. 1994) ("When Congress' instructions are conveyed at a high
level of generality, an agency is not likely to consider its action as
an 'interpretation' of the authorizing statute, nor is that action likely
to be challenged as a 'misinterpretation.' "). Still, we have also
recognized a significant overlap between Chevron step II and APA
arbitrary or capricious review. See, e.g., Republican Nat'l Comm.
v. FEC, 76 F.3d 400, 407 (D.C. Cir. 1996); Arent, 70 F.3d at 616 n.6;
Regulatory Util. Comm'rs, 41 F.3d at 728. At bottom, the label put
on the reviewing framework is not so important in this case: it is
not much different to ask whether MMS' regulation is "necessary
and proper" than to ask whether it is "arbitrary [or] capricious."

 The district court saw no need to reach this issue given its
resolution of the antecedent question of the agency's authori-
ty in favor of Amax. See Amax Land Co., 1998 WL 306582,
at *3. That, of course, does not bar us from doing so: these
are questions of law, which were presented to the district
court, and we sit in the same posture as the district court in
reviewing an administrative regulation or adjudication. See,
e.g., Associated Builders & Contractors, Inc. v. Herman, 166
F.3d 1248, 1254 (D.C. Cir. 1999); Marshall County Health
Care Auth. v. Shalala, 988 F.2d 1221, 1225 (D.C. Cir. 1993).
Still, since the issue has not been fully briefed, and since both
Amax (paradoxically) and MMS request us to remand to the
district court for consideration of this issue, we will do so,
notwithstanding the amicus' preference that we resolve it
here and now. Cf. Narragansett Indian Tribe v. National
Indian Gaming Comm'n, 158 F.3d 1335, 1338 (D.C. Cir. 1998)
(declining to consider an argument advanced by an amicus
but not by any party).

IV.

Whether the benchmark rate is the CVF rate or the IRS
rate, there remains the issue of MMS' authority to allow the
rate to shift over time and to assess compound interest (i.e.,
interest on interest). The regulation itself is silent on these
matters, but the agency interpreted it in the payment order
issued to Amax as authorizing the assessment of compound
interest (compounded daily), apparently reasoning that the
regulation adopts the IRS rate set forth in 26 U.S.C.
s 6621(a)(2), which contemplates shifting interest rates, see
id. s 6621(b), and that an adjacent provision in the Internal
Revenue Code provides that the rate shall be compounded
daily, see id. s 6622(a).8

__________
8 MMS also advanced its interpretation of the regulation as
authorizing compound interest in the regulation's preamble. See 59
Fed. Reg. at 14,558 ("The IRS rate is compounded daily, as
contrasted to the CVF rate which is calculated as simple interest.").

 Amax does not claim these are misinterpretations of the
agency's own regulation, 30 C.F.R. s 218.202, but rather
submits that the DCA and the implementing Standards place
an external constraint on the agency's authority to assess
compound interest or to employ shifting rates. The DCA
provides, in relevant part,

s 3717. Interest and penalty on claims

(a)(1) The head of an executive, judicial, or legislative
agency shall charge a minimum annual rate of interest on
an outstanding debt on a United States government
claim owed by a person that is equal to the average
investment rate for the Treasury tax and loan accounts
for the 12-month period ending on September 30 of each
year, rounded to the nearest whole percentage point ...

...

(c) The rate of interest charged under subsection (a) of
this section--

...

(2) remains fixed at [the rate in effect on the date
from which interest begins to accrue] for the duration of
the indebtedness.

31 U.S.C. s 3717 (emphasis added). MMS defends its au-
thority to employ shifting rates by contending that
s 3717(c)(2)'s apparently plain prohibition of shifting rates
applies only when an agency chooses to impose the "mini-
mum" CVF rate and not when an agency exerts its authority,
drawn from these provisions or others, to assess a higher
rate. Even aside from the fact that we owe no deference to
MMS' interpretation of a statute it does not administer, see,
e.g., Scheduled Airlines Traffic Offices v. Department of
Defense, 87 F.3d 1356, 1361 (D.C. Cir. 1996); OPM v. FLRA,
864 F.2d 165, 171 (D.C. Cir. 1988); the DCA is unambiguous
on this issue. 31 U.S.C. s 3717(a)(1) requires agencies to
assess interest on overdue obligations and sets a floor on the
rate chosen at the CVF rate. The ceiling is established by 5
U.S.C. s 706(2)(A): the agency may not choose an arbitrary
or capricious rate. See also 4 C.F.R. s 102.13(c) ("An agency
may set a higher rate if it reasonably determines that a

higher rate is necessary to protect the United States."). Any
rate within this spectrum is "the rate of interest charged
under subsection (a)" for purposes of 31 U.S.C. s 3717(c), and
hence must remain "fixed ... for the duration of the indebt-
edness." We therefore firmly reject the government's argu-
ment.

As to compound interest, the DCA is silent but Amax
invokes the Standards, which expressly disfavor the practice
of charging compound interest.

The rate of interest shall be the [CVF rate]. An agency
may assess a higher rate of interest if it reasonably
determines that a higher rate is necessary to protect the
interests of the United States. The rate of interest, as
initially assessed, shall remain fixed for the duration of
the indebtedness, except that where a debtor has default-
ed on a repayment agreement and seeks to enter into a
new agreement, the agency may set a new interest rate
which reflects the current value of funds to the Treasury
at the time the new agreement is executed. Interest
should not be assessed on interest, penalties, or adminis-
trative costs required by this section.

4 C.F.R. s 102.13(c) (emphasis added). The government's
response echos its unsuccessful attempt to evade the DCA's
prohibition on shifting rates. We are told that the "interest
should not be assessed on interest" command applies only in
the case of "interest ... required by this section," that the
only interest required by s 102.13 is the CVF rate, and hence
that the rule against compound interest does not apply when
the agency imposes a rate higher than the CVF rate. We
think that is a rather implausible reading of the regulation.
How could the CVF rate be the only "required" rate when
the second sentence contemplates a higher rate? The "inter-
est ... required by this section" sensibly means either the
CVF rate (as described in the first sentence) or a higher rate
(as described in the second sentence). It may be that the
government's reading, while weak, is nonetheless reasonable.
But even assuming it is reasonable (we express no view), we
owe no deference to MMS' interpretation of a regulation that
it did not promulgate and does not administer, Martin v.

OSHRC, 499 U.S. 144, 152-53 (1991). Left to proceed de
novo, we of course pick what we think is the best interpreta-
tion of the regulation.

The government, however, points to an introductory provi-
sion of the Standards that says: "The standards set forth in
this chapter shall apply to the administrative handling of civil
claims of the Federal Government for money or property but
the failure of an agency to comply with any provision of this
chapter shall not be available as a defense to any debtor." 4
C.F.R. s 101.8 (emphasis added). Unfortunately, this claim
comes too late.9 The government concedes that it did not
present this contention to the district court, and it cannot be
heard to do so now. See Singleton v. Wulff, 428 U.S. 106, 120
(1976). Whether it can timely assert this "defense" on re-
mand, see R.G. Johnson Co. v. Apfel, 172 F.3d 890, 895 (D.C.
Cir. 1999) (citing Peralta v. U.S. Attorney's Office, 136 F.3d
169, 173 (D.C. Cir. 1998)), and, if so, the proper outcome on
the merits, are matters we leave to the district court to decide
in the first instance.10

* * * *

That disposes of Amax's challenge to the regulation itself,
but there is one last wrinkle concerning Amax's challenge to

__________
9 Our treatment of this claim as waived differs from our earlier
willingness to consider the impact of the DCA on the common law
notwithstanding the government's failure to make the argument.
There is a good reason. Unlike the DCA, which provided an
additional argument supporting the government's already asserted
claim that the common law does not apply to it, the government's
citation of 4 C.F.R. s 101.8 here is surely a new claim, akin to a
statute of limitations defense.

10 It may be that 4 C.F.R. s 101.8, while preventing a debtor
from invoking the Standards as a "defense" to the government
agency's "administrative handling of civil claims," does not preclude
a challenge--wholly aside from a dispute over a particular debt--to
the legality of an agency's regulation. Here Amax challenges both
MMS' payment order and MMS' regulation, 30 C.F.R. s 218.202.
See Complaint for Declaratory and Set Aside Relief p 1, Civ. Act.
No. 96-839 (D.D.C. Aug. 6, 1996).

the payment order. Although we hold that the DCA and the
Standards forbid the use of shifting interest rates or the
assessment of compound interest, the DCA comes with two
exemptions. The one invoked by the agency provides that 31
U.S.C. s 3717 does not apply "to a claim under a contract
executed before October 25, 1982, that is in effect on October
25, 1982." 31 U.S.C. s 3717(g)(2); see also 4 C.F.R.
s 102.13(i)(1)(ii) (identical exemption from operative subsec-
tions of 4 C.F.R. s 102.13). The parties disagree as to
whether Amax's lease agreement is such a pre-1982 contract.

Amax is the successor-in-interest to a 1965 lease. Section
2(c) of the original lease required the lessee to remit royalties
based on the weight of the coal produced (171/2 cents per ton
for the first 10 years and 20 cents per ton for the remainder
of the first 20-year period), and s 3(d) reserved to MMS the
right "reasonably to readjust and fix royalties payable here-
under and other terms and conditions at the end of 20 years
from the date hereof and thereafter at the end of each
succeeding 20-year period during the continuance of this
lease...." In 1985, the agency, invoking s 3(d), readjusted
the lease terms to provide that "the royalty shall be 121/2
percent of the value of the coal produced by strip or auger
methods and 8 percent of the value of the coal produced by
underground mining methods."

Amax insists that the 1985 readjustment of the royalty rate
effected a novation of the 1965 lease agreement and a con-
summation of a new agreement going forward. The govern-
ment responds that the 1985 readjustment was explicitly
contemplated by the original 1965 lease, and therefore is
properly characterized as an assertion of rights under the
original contract, not a novation. Since Amax, as the party
challenging the payment order, has not cited any authority in
support of its view, we are inclined to agree with the govern-
ment's characterization, see Carducci, 714 F.2d at 177, which
seems the more reasonable one in any event. Accordingly,
we hold that the DCA imposes no constraint on MMS vis-a-
vis underpayments on this particular lease, and unless it is
determined on remand that shifting rates or compound inter-
est are not "necessary" within the meaning of MLLA s 32 as

regards this particular lease, the payment order is valid. See
30 U.S.C. s 189 ("The Secretary of the Interior is authorized
... to do any and all things necessary to carry out and
accomplish the purposes of this chapter.").

* * * *

For the foregoing reasons, we reverse the district court
and uphold MMS' regulation, 30 C.F.R. s 218.202, except
insofar as the agency has interpreted it to allow for shifting
interest rates and compound interest. We remand the case
for the district court to consider Amax's claim that the
regulation, insofar as it adopts the IRS rate, is not "necessary
and proper" within the meaning of MLLA s 32. And we
uphold the payment order in all respects, subject to the
possibility that Amax may demonstrate on remand that com-
pound interest and shifting rates are not "necessary" within
the meaning of MLLA s 32 as regards Amax's particular
lease.

So ordered.