The long bureaucratic nightmare for a Louisiana man who purchased an oil and gas lease in the Ronald Reagan administration’s early days but was denied the right to drill ended last week in federal district court in D.C. In the lawsuit by Sidney Longwell of Baton Rouge for his tiny company Solenex, LLC, Senior Judge Richard J. Leon ruled the federal government illegally canceled his lease and voided his application for permit to drill, or an APD; he ordered both reinstated.
As to the federal government’s claim that it may cancel contracts with private citizens at any time, Judge Leon wrote, “Horsefeathers!”
It is up to the Trump administration if it wants to continue to defend the indefensible and, perhaps more importantly, if it wants to subject the hundreds of energy leases it issued to President Barack Obama-style revocation after President Trump leaves office.
In 1982, the Bureau of Land Management issued Longwell a 6,247-acre oil and gas lease in the Badger-Two Medicine Area of the Lewis and Clark National Forest — south of Glacier National Park, the Great Northern Railroad, and U.S. Highway 2, east of private lands, and southwest of the Blackfeet Reservation in Glacier County in northwestern Montana. In 1983, an APD was submitted for a well to evaluate the potential of that part of the Overthrust Belt, whose unique geology may yield “100 trillion cubic feet of natural gas.” After four National Environmental Policy Act and National Historic Preservation Act reviews, which found no “cultural resources” or “religious site or activities,” the APD was approved in 1985, 1987, 1991, and finally in 1993 — subject to onerous mitigation measures. New reviews are required if producible quantities of energy are found by drilling.
Nonetheless, the Bill Clinton administration tried to kill the lease. In 1993, 1994, 1995, 1996, and 1997, then-Interior Secretary Bruce Babbitt suspended lease activity for various ostensible reasons; then, in 1998, he made it indefinite. In 1983, the nearby Blackfeet tribe supported leasing, but over the years changed its position, issued drilling rights on its reservation, and asserted the area is sacred. A federal official said, however, a $5 million payment to the tribe would remove its objections. In 2013, Longwell sued to end the decades-long suspension. In 2015, hearing his pitiful plight, Judge Leon called it “Kafkaesque” and ordered a decision. In 2016, then-Interior Secretary Sally Jewell canceled the lease and voided the APD.
The revocation is absolutely unprecedented. Never in the history of the Mineral Leasing Act — by which Congress authorized secretaries to issue and oversee oil and gas leases — has one been canceled unilaterally. At 2017’s prestigious Rocky Mountain Mineral Law Institute, a scholar warned, given the Solenex cancellation, “the rights guaranteed under a federal oil and gas lease are not as certain as they once seemed and are often not what lessees bargained for.” The United States Chamber of Commerce argued that the “unilateral and arbitrary cancellation of [the lease], more than 30 years after its issuance, violates well-established principles of contract law and property rights [creating] considerable uncertainty surrounding the enforceability of [all] government contracts.”
Judge Leon did not need to reach the issue he predicted would take the case to the Supreme Court. Instead he relied on its “unique facts,” that is cancellation of the “lease after 33 years without notice and based on a supposed pre-lease violation of [statutes that] had never been disclosed to Solenex.” Moreover, the secretary canceled “Solenex’s 27-year old APD after twice approving it and similarly giving no indication that the underlying lease was invalid.” These actions, ruled Judge Leon, are “arbitrary, capricious, an abuse of discretion, or not otherwise in accordance with law.” After all, the “Government’s fulfillment of its contractual duties — ‘governed generally by the law applicable to contracts between private individuals’ — requires it to act in good faith. It did not do so here!”
Over to you, President Trump. Your laudatory energy program hangs in the balance.
William Perry Pendley is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Mountain States Legal Foundation, has argued cases before the Supreme Court and worked in the Department of the Interior during the Reagan administration. He is the author of Sagebrush Rebel: Reagan’s Battle with Environmental Extremists and Why It Matters Today.
