F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAR 16 2000
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
IMC KALIUM CARLSBAD, INC.,
Plaintiff - Appellee,
v. No. 99-2047
INTERIOR BOARD OF LAND
APPEALS; BUREAU OF LAND
MANAGEMENT; BRUCE BABBITT,
Secretary of the Interior,
Defendants,
YATES PETROLEUM CORPORATION
and POGO PRODUCING COMPANY,
Defendants - Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW MEXICO
(D.C. NO. CIV-97-1524-JC/RLP)
Ernest L. Carroll, Losee, Carson, Haas & Carroll, P.A., Artesia, New Mexico
(Gregory J. Nibert, James A. Gillespie, Hinkle, Cox, Eaton, Coffield & Hensley,
L.L.P., Roswell, New Mexico, with him on the briefs), for appellants.
Charles C. High, Jr. (Cynthia S. Anderson with him on the brief), Kemp, Smith,
Duncan & Hammond, P.C., El Paso, Texas, for appellee.
Before HENRY, ANDERSON, and LUCERO, Circuit Judges.
ANDERSON, Circuit Judge.
This controversy arises from an August 20, 1992, auction by the Bureau of
Land Management (“BLM”) of a potassium lease on 5,280 acres of federal land in
New Mexico. The BLM rejected, for alleged bad faith, the high bid of defendants
Yates Petroleum Company and Pogo Producing Company (“Yates/Pogo”) who bid
together. 1 The BLM awarded the lease to the next highest bidder, IMC Kalium
Carlsbad, Inc. (“IMC”). On appeal by Yates/Pogo, the Interior Board of Land
Appeals (“IBLA”) reversed the BLM’s decision and ordered the lease awarded to
Yates/Pogo. IMC then filed this suit in federal district court challenging that
decision. The district court reversed the IBLA and reinstated the original lease
award by the BLM. Defendants Yates/Pogo appeal, alleging that the district court
failed to accord the required deference to the decision of the IBLA as the
authorized representative of the Secretary of the Interior (“Secretary”). We agree
and hold that under the governing standard of review, the IBLA’s decision must
be upheld because it is supported by substantial evidence and is not arbitrary or
capricious. Accordingly, we reverse the decision of the district court.
1
Yates and Pogo agreed that each would own 50 percent of the lease.
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I. BACKGROUND
Potassium, or “potash,” is used in fertilizer. Sylvinite and langbeinite are
two types of potash ore, with langbeinite commanding a higher price. The
potassium lease at issue includes the right and duty to recover potash from 5,280
acres 2 of federal land in Eddy County, New Mexico. 3 This region in southeast
New Mexico, near Carlsbad, contains both potassium and oil and gas reserves.
IMC has substantial potash mining operations in the region. Yates holds oil and
gas leases in sections 11 and 14, and Pogo holds oil and gas leases in section 23
of the disputed potash lease area. The lease area includes potash ore in four ore
zones: the tenth, eighth, fourth, and second. See BLM Lease Offer Statement,
Appellants’ App. Vol. I at 305. The fourth and the tenth ore zones have the most
economic potential. The fourth ore zone extends to sections 11 and 14 and
contains potash as langbeinite. The tenth ore zone underlies sections 14 and 23
2
As the district court noted, “a cursory perusal of 30 U.S.C. § 283 appears
to indicate a statutory limit of 2,560 acres for competitive potassium leases.”
IMC Kalium Carlsbad, Inc. v. Babbitt, 32 F. Supp. 2d 1264, 1277 n.14 (D.N.M.
1999). Because neither party addressed the limit’s applicability to this lease, we
do not consider the issue.
3
The lease parcel is New Mexico Principal Meridian, Township 22 South,
Range 31 East, section 3 south ½; section 4 south ½; section 5 north ½ of the
south ½ and north ½ of the south ½ of the south ½; all of sections 8 to 11
inclusive; section 13 southwest ¼ and south ½ of the northwest ¼; section 14;
section 23; section 24 northwest ¼; and section 26 north ½ of the north ½. See
Notice of Potassium Lease Sale, Parcel 2, Appellants’ App. Vol. I at 302.
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and, to a lesser extent, section 11 and contains predominantly sylvinite with some
langbeinite.
Given the competing interests in the area, the Secretary issued an order to
“protect the rights of the oil and gas and potash lessees and operators.” See Oil,
Gas & Potash Leasing and Development Within the Designated Potash Area of
Eddy & Lea Counties, New Mexico, 51 Fed. Reg. 39,425 (1986) (“1986 Order”). 4
The 1986 Order requires oil and gas leases and potash leases to include parallel
stipulations that:
Drilling for oil and gas shall be permitted only in the event that the
lessee establishes to the satisfaction of the authorized officer,
[BLM], that such drilling will not interfere with the mining and
recovery of potash deposits, or the interest of the United States will
best be served by permitting such drilling.
. . . No wells shall be drilled for oil or gas at a location which,
in the opinion of the authorized officer, would result in undue waste
of potash deposits or constitute a hazard to or unduly interfere with
mining operations being conducted for the extraction of potash
deposits.
....
. . . no [potash] mining or exploration operations shall be
conducted that, in the opinion of the authorized officer, will
constitute a hazard to oil or gas production, or that will unreasonably
interfere with orderly development and production under any oil or
gas lease issued for the same lands.
4
The 1986 Order updates and replaces previous orders by the Secretary
regarding the New Mexico potash area.
-4-
Id. The 1986 Order also clarifies that, with certain exceptions: “It is the policy
of the Department of the Interior to deny approval of most applications for
permits to drill oil and gas test wells from surface locations within the potash
enclaves.” Id. Potash enclaves are defined as areas “where potash ore is kown
[sic] to exist in sufficient thickness and quality to be mineable under existing
technology and economics.” Id. The exceptions allow the creation of drilling
islands within potash enclaves and drilling in barren areas within the enclaves.
See id. at 39425-26.
In 1991, Yates/Pogo filed applications for permit to drill (“APDs”) with the
BLM for the oil and gas leases in Sections 11, 14, and 23 (areas included in the
potash lease). 5 In support of Pogo’s APDs for oil and gas development, George
Warnock, Mining and Geological Consultant, submitted two affidavits to the
BLM. 6 Mr. Warnock stated that “[a]s the only mixed ore processor in the
Carlsbad Potash District, only IMC could mine in the” disputed lease area and
5
Section 11 contains six producing oil and gas wells and eight appealed
APDs; Section 14 contains three producing oil and gas wells and one appealed
APD; and Section 23 contains four producing oil and gas wells and twelve
appealed APDs. See Appellants’ App. Vol. I at 354.
6
The Warnock affidavits are entitled Report and Economic Analysis of the
Carlsbad Potash District in the New Lease Application Area for Submission to the
State Director, Bureau of Land Management, New Mexico State Office, Mar. 17,
1992, see Appellant’s App. Vol. I at 316, and Response to “Decision” Denial of
Application for Permit to Drill (APDs) in the Secretary’s Oil Potash Area, Sept.
16, 1992, see Appellants’ App. Vol. I at 283.
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that the “area probably will never be mined but if it is, this will certainly only be
some 30 years hence.” See Appellants’ App. Vol. I at 288-89. He based his
evaluation on the current potash mining companies in the area, their current
accessible reserves, and estimates of the minimum thickness of potash ore to
economically justify mining in the disputed area. He noted that IMC is the only
operator in the area that currently processes mixed sylvinite and langbeinite ore,
like that found in the tenth ore zone of the disputed area. Mr. Warnock’s analysis
did not evaluate the economics of any potash development by Yates/Pogo. By a
series of decisions in 1992, the BLM denied the APDs on the basis that the
potential oil and gas wells were in potash ore zones and that drilling could lead to
waste of potash. Yates/Pogo appealed the APD denials, which are still pending
before the IBLA.
On April 30, 1991, IMC requested that the BLM offer potassium leases in
the area by competitive sale. In July 1992, the BLM published a Notice of
Potassium Lease Sale to be held August 20, 1992. 7 On August 12, 1992, after
Yates/Pogo mining and geologic consultants Gary Hutchinson and Leo Lammers
evaluated the BLM data on the potassium lease sale, Hutchinson wrote to Randy
Patterson, Yates’ land manager and corporate secretary:
The Notice was published in the Carlsbad Current-Argus on July 24, 31,
7
and August 7, 1992. See Cantwell Aff., Appellee’s Supp. App. Vol. III at 494.
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I encourage you to continue to pursue approval to bid on the
Potash Leases August 20.
The root of Yates[’] problem getting approvals for drilling
within the potash area is the BLM’s outdated economic data,
disinterest in commerciallity [sic] of potash, and mandate to protect
potash mines. The economically troubled potash industry is, of
course, prodding the BLM to “do its job.”
The outlines of known potash deposits . . . are much smaller
than the BLM will show using their very low cut-off grades.
However, if a reasonable mineral exploration company has the leases
and drills some core holes for tonnage and grade information then
performs feasibility studies using real world data, the BLM personnel
will be disarmed with facts and science thereby aiding Yates[’]
ability to obtain drilling approvals within the lease sale area.
There must be an amount of investment that makes bidding on
potash cost effective relative to legal action which at best will only
cover up but not fix the drilling approval problem.
Appellants’ App. Vol. II at 405.
The BLM offered the potash lease by competitive sale. In writing and
orally at the auction, the BLM informed participants, as required by 43 C.F.R.
§ 3535.3-3(f), “that the Secretary reserves the right to reject any and all bids, and
the right to offer the lease to the next qualified bidder if the successful bidder
fails to obtain the lease for any reason.” At oral auction, on August 20, 1992,
Yates/Pogo made the highest bid of $6.00 per acre with IMC dropping out after a
bid of $5.15 per acre. 8
8
The other parcel (Parcel 1) offered at the auction is not involved in this
(continued...)
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A. BLM Decision
On October 22, 1992, the Deputy State Director, Lands and Minerals, of the
BLM New Mexico State Office rejected Yates/Pogo’s bid by letter decision. The
decision focused on the statements by Mr. Warnock, on behalf of Yates/Pogo
prior to the lease auction, asserting that IMC is the only company that can mine
the tenth ore zone. The BLM stated:
We conclude the area can be mined. Not mining this area for potash
would result in undue waste of potash.
. . . The statement by Mr. Warnock on behalf of the applicants,
that the lessee does not intend to develop the deposit exhibits bad
faith. . . . Despite the applicants’ interest in acquiring the lease, the
applicants have expressed no desire to mine, joint venture or
otherwise promote potash development.
Appellants’ App. Vol. I at 246.
Yates/Pogo requested reconsideration of the BLM decision; submitted
supplementary information, including maps, reports, and notes of consultants
Lammers and Hutchinson; and met with BLM officials to show Yates/Pogo’s
good faith to develop the potash lease. The BLM rescinded its October 22, 1992,
decision so that it could consider the supplementary materials. In the materials,
Yates/Pogo argued to the BLM that their “bid on the potassium lease was made in
good faith with every intention of allowing potash development to occur
8
(...continued)
dispute.
-8-
simultaneously with oil and gas development should the potash resources therein
be determined to exist in economic quantities and quality.” Letter from Gregory
J. Nibert, Yates/Pogo attorney, to Larry L. Woodard, BLM State Director 4 (Nov.
19, 1992), Appellant’s App. Vol. I at 281. Yates further explained to BLM that:
Frustrated by the regulations that unilaterally allowed potash mining
companies and BLM representatives to arbitrarily withdraw oil and
gas exploration areas from use by the oil and gas lessees as well as
the requirements that hold all potash exploration and mining
information confidential, Yates and others embarked on a program to
develop potash mining information from public sources. The
knowledge developed from this program would allow Yates to make
an independent determination as to whether oil and gas exploration
could be safely and economically conducted in the same area as
potash mining.
Pursuant to that endeavor, Yates hired independent
consultants, lawyers and experts knowledgeable in both mining and
oil and gas operations to determine the feasibility for both industries
to coexist in the [potash area].
....
. . . The result of the evaluation of potash potential in the lease
sale area was a strong recommendation by Yates experts to bid on
[the potash lease].
Appellants’ App. Vol. II at 355-57. On January 5, 1993, the BLM again rejected
the Yates/Pogo bid. The Decision stated that:
we conclude that the bid was made in bad faith and not in the best
interest of recovery of the potassium resources.
....
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[Yates/Pogo] demonstrate[] two incompatible positions . . .
when dealing with appeals of oil and gas APD’s to IBLA and when
obtaining potassium leases.
....
. . . We find the conflicting statements as evidence of bad faith
in that neither company, being oil and gas companies by nature,
seriously intends to develop the potassium resources. We also find
these statements to be contradictory to the general policy of the
[1986 Order], insofar as a company attempts to obtain a potassium
lease for the purpose of developing oil and gas resources.
....
. . . Simultaneous development of both resources disregards
safety of individuals working in an underground mining
environment. . . . During the production life of the [oil and gas]
well, petroleum products can migrate into the potash bearing
formation and remain in place long after the well is plugged and
abandoned. . . .
A significant hydrocarbon release would prompt the . . . Mine
Safety and Health Administration (MSHA) . . . [to require] the added
expense of equipment, ventilation, testing, and training [that] would
place an undue economic hardship on affected potash operations . . . .
Appellants’ App. Vol. I at 236-39.
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B. IBLA Decision
On January 27, 1993, Yates/Pogo appealed the BLM’s decision to the
IBLA. 9 On February 10, 1997, the IBLA reversed the BLM’s decision. See Pogo
Prod. Co., 138 I.B.L.A. 142 (1997). The IBLA first agreed that there is “no
obligation to accept any bid” but held that “the record must disclose a rational
basis for the rejection and must be sufficient to establish that the decision was not
arbitrary, capricious, or in error.” Id. at 154. The IBLA found “the record
insufficient to support BLM’s rationale for rejecting appellants’ high bid” and
reversed. Id. The IBLA denied IMC’s rehearing request on September 22, 1997.
C. District Court Decision
IMC filed suit on November 26, 1997, in the district court, which reversed
the IBLA in a January 12, 1999, order. The court held that “[t]he record provides
ample evidence to support BLM’s conclusion that award of the lease to Yates and
Pogo would not be in the best interest of potash recovery.” IMC Kalium
Carlsbad, Inc. v. Babbitt, 32 F. Supp. 2d 1264, 1276-77 (D.N.M. 1999).
9
Under a stipulated settlement in another federal suit to enjoin the BLM
from issuing the lease to IMC, the BLM agreed to not issue the lease until
Yates/Pogo exhausted their administrative remedies. However, the BLM issued
the lease to IMC due to an alleged administrative error and the court ordered
BLM to pay sanctions to Yates/Pogo and to cancel the lease. See IMC, 32 F.
Supp. at 1269 n.7.
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II. ANALYSIS
The hierarchy in this case is that the district court reversed the IBLA’s
decision, which reversed the BLM’s decision. We review, but accord no
deference to, the district court’s decision. See Mt. Emmons Min. Co. v. Babbitt,
117 F.3d 1167, 1170 (10th Cir. 1997).
Under the Administrative Procedure Act (“APA”), we defer “to the
decisions of the Interior Board of Land Appeals, and we will set aside an IBLA
decision only if it is arbitrary, capricious, otherwise not in accordance with law,
or not supported by substantial evidence.” American Colloid Co. v. Babbitt, 145
F.3d 1152, 1154 (10th Cir. 1998) (citing 5 U.S.C. § 706; Hoyl v. Babbitt, 129
F.3d 1377, 1382 (10th Cir. 1997)); see also Olenhouse v. Commodity Credit
Corp., 42 F.3d 1560, 1575 (10th Cir. 1994) (applying standard of review to
informal agency action).
This case hinges on two important subsidiary questions that affect our
application of the standard of review: (1) when reaching its decision, what
weight, if any, must the IBLA accord the findings and decision of the BLM? and
(2) what weight, if any, must we accord the findings and decision of the BLM
when reviewing the IBLA decision? These questions are pivotal because the
district court focused on whether the decision of the BLM, rather than that of the
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IBLA, was supported by the evidence. 10 Yates/Pogo contend that such an analysis
impermissibly deferred to the BLM. We agree.
The IBLA has de novo review authority over BLM decisions. 11 See
National Wildlife Fed’n, 145 I.B.L.A. 348, 362 (1998) (review “is de novo”
because IBLA is “delegated responsibility to decide for the Department ‘as fully
and finally as might the Secretary’ appeals regarding use and disposition of the
public lands and their resources”) (quoting 43 C.F.R. § 4.1). A decision of a
subordinate agency division, such as the BLM, does not bind the agency. See
Catron v. Babbitt, 955 F. Supp. 627, 630-31 (W.D. Va. 1997); see also U.S. Soil
Conditioning v. NLRB, 606 F.2d 940, 944 (10th Cir. 1979).
With respect to our review, we examine both the BLM’s and the IBLA’s
decisions; 12 but, as indicated above regarding our general standard of review,
because the IBLA is the final decision maker of the agency, we apply the
The district court stated, “I need only examine evidence presented to the
10
IBLA that could support BLM’s asserted reasons for rejecting the Yates/Pogo
bid.” IMC, 32 F. Supp. 2d at 1272.
Contrary to the district court’s note, see IMC, 32 F. Supp. 2d at 1269 n.8,
11
the IBLA’s de novo review authority is not limited to formal evidentiary hearings
(presumably referring to hearings before an administrative law judge appointed by
the IBLA).
12
Appellant’s Motion to Supplement the Record asks this Court to add
copies of the leases, well data, and a map of the potash area to the record. Our
review must focus on the materials before the IBLA for its decision. Thus, since
we have the relevant information considered by the IBLA, we decline to
supplement the record and deny the motion.
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deferential standard of review to the decision of the IBLA, not of the BLM. 13 See
Four B Corp. v. NLRB, 163 F.3d 1177, 1182 (10th Cir. 1998) (court must uphold
agency appeals board if supported by substantial evidence; standard of review
does not change when subordinate agency division and appeals board reach
different conclusions); Catron, 955 F. Supp. at 631 (court must uphold IBLA’s
decision if supported by substantial evidence); FCC v. Allentown Broad. Corp.,
349 U.S. 358, 364 (1955) (upholding FCC reversal of hearing examiner).
In this case, the IBLA found insufficient evidence to support the BLM’s
rejection of a high lease bid for bad faith. The IBLA decided, therefore, based on
its own review of the record, that the lease should be awarded to the highest
bidder, Yates/Pogo.
Applying these standards, we review the IBLA’s decision to determine
whether it was supported by substantial evidence and was not arbitrary or
capricious.
13
IMC correctly argues that “an agency’s action must be upheld, if at all, on
the basis articulated by the agency itself.” Motor Vehicle Mfrs. Ass'n v. State
Farm Mut. Ins. Co., 463 U.S. 29, 50 (1983). However, instead of looking at the
IBLA’s reasoning for its decision, IMC urges us to focus on the issue articulated
by the IBLA: whether the record shows “a rational basis for the rejection” of the
high bid, Pogo, 138 I.B.L.A. at 154; and thus to review the BLM decision for a
rational basis. With this statement, the IBLA neither relinquished its review
authority nor altered the nature of our standard of review. Our focus is to review
the decision of the IBLA to overturn the BLM and award the lease to Yates/Pogo.
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A. The IBLA Decision Was Supported by Substantial Evidence
The IBLA addressed the BLM’s findings that: (1) inconsistencies between
the Warnock and Hutchinson analyses showed Yates/Pogo’s bad faith, (2) Mr.
Hutchinson’s declaration that the tenth zone was uneconomic rendered the
Yates/Pogo bid an undue waste of potash resources, and (3) Yates/Pogo’s
development of oil and gas would create safety risks and cause an economic
hardship on the potash industry. We are unpersuaded by IMC’s argument that
“[b]y focusing on each factor separately, rather than viewing them as being
interrelated, . . . the IBLA failed to fully consider the basis for BLM’s decision to
reject Appellants’ bid.” Appellee’s Br. at 34. Whether we evaluate the factors
separately or together, substantial evidence supports the IBLA’s decision, as
discussed below.
1. Bad Faith
The IBLA stated:
In our view BLM’s conclusion, based on the inconsistencies
between the Warnock and Hutchinson submissions, that appellants
submitted their bid in bad faith is unwarranted. We do not agree that
the reports demonstrate appellants espouse contradictory positions on
the economic viability of the potash deposit depending on whether
they seek APD approval or potash lease acquisition. Even if the
studies did conflict, neither the fact that a later, more comprehensive
evaluation specifically designed to evaluate the economic potential of
potash lease procurement reached a somewhat different result than an
earlier study prepared for a different purpose nor appellants’
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continued reliance on the earlier Warnock study as support for the
issues it was commissioned to address, demonstrates bad faith.
Rather the two analyses conform to appellants’ acknowledged goal of
pursuing the profitable development of both oil and gas and potash.
Pogo, 138 I.B.L.A. at 156-57. The record contains substantial evidence to
support the IBLA conclusion that the Hutchinson and Warnock reports do not
evidence bad faith. The Warnock report calculated a threshold mining thickness
necessary to economically mine potash in the lease area. It concluded that the
current potash mining companies had more profitable ore reserves to mine for at
least thirty years. The Warnock report did not make an evaluation or
recommendation with respect to Yates/Pogo’s ability to mine the potash. The
Hutchinson report focused on the economic potential for Yates/Pogo to develop
the potash lease and concluded that the fourth ore zone had economic potential
for Yates/Pogo to develop a small mine.
The IBLA may draw reasonable inferences from the evidence. See Worley
Mills, Inc. v. NLRB, 685 F.2d 362, 365 (10th Cir. 1982) (“A federal agency's
conclusions based upon such inferences are not to be overturned on review unless
they lack a reasonable basis.”); Adolph Coors Co. v. FTC, 497 F.2d 1178, 1184
(10th Cir. 1974) (“If the inference is supported by substantial evidence, it cannot
be set aside even though the court could draw a different inference.”) (upholding
FTC decision reversing administrative law judge). Thus, because it is supported
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by substantial evidence, we must accept the IBLA’s determination that the
Warnock and Hutchinson reports do not contradict nor evidence bad faith.
2. Undue Waste of Potash
The IBLA continued:
We further reject the claim that awarding the potash lease to
appellants would not be in the best interest of recovery of the
potassium resources because it would result in the undue waste of
potash and could pose an economic hardship on the potash industry.
The fact that Hutchinson’s analysis identifies as uneconomic some
potash ore zones BLM considers commercial does not mean that
those zones will be wasted should appellants be awarded the lease.
Pogo, 138 I.B.L.A. at 157. The record contains substantial evidence to support
the IBLA’s decision. The BLM conceded that: “While the BLM maps designate
a greater extent of mineable reserves than the Hutchinson study, BLM considers
Mr. Hutchinson’s study as reasonable. The BLM also realizes that economic
analyses done before mining are subject to considerable change.” Olsen Memo.,
Appellee’s App. at 122. Regarding the fourth ore zone, the BLM stated: “More
core drilling would be necessary to justify a new mine or develop a detailed
mining plan.” Cranston Memo., Appellee’s App. at 131. The evidence in the
record supports the conclusion that Yates/Pogo were not seeking to deceive the
BLM, but merely seeking to present the BLM with up-to-date data on the potash
reserves of the area. Indeed, the additional data would provide the BLM with a
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better sense of the potash mining potential in the area. Thus, given all the
evidence in the record, the IBLA did not err in deciding that a determination of
undue waste of potash was premature at lease issuance.
3. Safety Concerns
The IBLA concluded that the BLM’s remaining arguments regarding safety
concerns (and economic effects of a safety lapse):
rely on speculation and assume that BLM will fail to fulfill its
responsibilities to carefully scrutinize mining plans of operations
submitted pursuant to 43 CFR 3592.1 before granting the approval
necessary to allow mining to occur. We believe BLM’s authority to
approve or disapprove APD’s and proposed potash mining plans will
be adequate to regulate the parties’ activities in the area.
Pogo, 138 I.B.L.A. at 157-58. After review of the BLM’s decision, we agree with
the IBLA that the BLM’s conclusion that granting the lease to Yates/Pogo would
pose an undue economic hardship on the potash industry relies on speculation
about possible safety risks and conjecture about economic ramifications. The
record supports IBLA’s conclusion that BLM has substantial legal authority to
regulate Yates/Pogo’s actions under the oil and gas and potash leases to protect
the safety of miners.
In sum, we hold that the IBLA’s decision was supported by substantial
evidence in the record.
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B. The IBLA Decision Was Not Arbitrary or Capricious
IMC also claims that the IBLA’s decision was arbitrary and capricious.
First, IMC essentially argues that the BLM’s decision correctly interpreted the
Secretary’s 1986 Order and the IBLA decision violated the Order. Next, IMC
argues that the IBLA’s failure to defer to the BLM’s technical expertise was
arbitrary and capricious. Under the arbitrary and capricious standard, we “must
determine whether the agency considered all relevant factors and whether there
has been a clear error of judgment.” Olenhouse, 42 F.3d at 1574 (citing Motor
Vehicle Mfrs. Ass'n v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 (1983)).
1. 1986 Order
IMC argues, in essence, that the IBLA was arbitrary and capricious because
it incorrectly applied the 1986 Order. 14 Yates/Pogo respond that, at most, the
IBLA was interpreting the 1986 Order and making policy decisions that only the
IBLA has the authority to make. We agree that the IBLA is authorized to
14
IMC also suggests, without elaboration or citation of authority, that the
IBLA should have deferred to the BLM’s interpretation of the 1986 Order,
because the BLM is charged with administering the 1986 Order. We disagree.
IMC is only rephrasing its argument that the IBLA should defer to the BLM—an
argument that we rejected above. The Secretary’s delegation of authority to
administer the 1986 Order to the BLM does not deprive the IBLA, acting for the
Secretary, of authority to interpret that order and make policy that binds the BLM.
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interpret and apply the 1986 Order, including making policy choices, and that its
decision did not exceed those bounds.
The IBLA has authority to consider “whether the [Secretary’s] order was
properly applied and implemented.” Texas Oil & Gas Corp., 46 I.B.L.A. 50, 52
(1980). In the context of this case, our role is not “to decide which policy choice
is the better one, for it is clear that Congress has entrusted such decisions to the
[agency].” Arkansas v. Oklahoma, 503 U.S. 91, 114 (1992).
As discussed earlier, the 1986 Order enunciates “rules for concurrent
operations in . . . production of oil and gas and potash” and establishes parallel
restrictions on both oil and gas leases and potash leases so that neither will “cause
a hazard” or “interfere with” the development of the other. 1986 Order, 51 Fed.
Reg. at 39,425. The BLM stated that Yates/Pogo’s attempt “to obtain a potassium
lease for the purpose of developing oil and gas resources” is “contradictory to the
general policy of the [1986 Order].” Appellants’ App. Vol. I at 238. The IBLA
rejected this contention:
While BLM finds the concurrent development of oil and gas
incompatible with safe potash recovery, appellants disagree and
actively pursue simultaneous development of those resources.
Resolution of that disagreement, however, is not necessary in order
to settle the issues raised in the present appeal since we find that [the
bid was not made in bad faith].
Pogo, 138 I.B.L.A. at 157. The IBLA noted that “some of the issues surrounding
the feasibility of simultaneous oil and gas and potash development . . . will be
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addressed in the hearing ordered in [the APD appeal].” Id. at 158 n.13 (citing
Yates Petroleum Corp., 131 I.B.L.A. 230, 235-36 (1990) (referring APD matter
for hearing and decision by administrative law judge)). The IBLA was within its
authority when it concluded that awarding the lease to Yates/Pogo would not
violate the 1986 Order.
Accordingly, we conclude that the IBLA’s decision did not violate or
otherwise misapply the 1986 Order and, therefore, was not arbitrary and
capricious on that ground.
2. Agency Expertise
Finally, IMC argues that the IBLA decision was arbitrary and capricious
because it failed to defer to the BLM’s determinations of technical matters. 15 We
disagree. The IBLA may choose, but is not obligated, to defer to the BLM’s
technical determinations. See Deschutes River Landowners Comm., 136 I.B.L.A.
105, 110 (1996). We defer to the IBLA’s determinations (not that of the BLM) in
areas of its experience and expertise if supported by the record. See e.g.,
Colorado Pub. Util. Comm’n v. Harmon, 951 F.2d 1571, 1579 (10th Cir. 1991)
15
As indicated by our analysis above, we are unpersuaded by IMC’s other
arguments, including the contention that the IBLA failed to sufficiently consider
the evidence and explain its decision.
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(court should defer to agency’s expertise). We defer to the IBLA’s technical
determinations and hold that the IBLA decision was not arbitrary and capricious.
III. CONCLUSION
The IBLA reasoned that the issue of simultaneous development under the
1986 Order would be properly decided in the separate APD proceeding and that
the BLM had adequate authority to regulate the mining plans of Yates/Pogo under
the potash lease and drilling under the relevant oil and gas leases. 16 The IBLA
decision ordered the BLM to honor the high bid in this case. For the reasons
stated above, because the IBLA’s decision was based on substantial evidence and
was not arbitrary and capricious, we conclude that it must be upheld.
Accordingly, the decision of the district court is REVERSED.
16
We note that the BLM can enforce Yates/Pogo’s obligations under the
leases. See 43 C.F.R. §§ 3509.4-2, 3598.4 (giving the BLM authority to issue
enforcement orders and institute legal proceedings to cancel lease if lessee fails to
comply with regulations).
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