United States District Court, District of Wyoming
CLOUD PEAK ENERGY INC.; NATIONAL MINING ASSOCIATION; and WYOMING MINING ASSOCIATION, Petitioners,
UNITED STATES DEPARTMENT OF THE INTERIOR; et al., Respondents. AMERICAN PETROLEUM INSTITUTE; Petitioner,
UNITED STATES DEPARTMENT OF LHE INTERIOR; et al., Respondents. TRI-STATE GENERATION AND TRANSMISSION ASS'N, INC.; BASIN ELECTRIC POWER COOPERATIVE; and WESTERN FUELS-WYOMING, INC., Petitioners,
DAVID BERNHARDT, in his official capacity as Secretary of the U.S. Department of Interior; et al. Respondents.
ORDER GRANTING PARTIAL PRELIMINARY
W. Skavdahl United States District Judge.
joined cases come before the Court on Petitioners' Joint
Motion for Preliminary Injunction (Doc. 22) and supporting
memorandum (Doc. 23). Independent Petroleum Association of
America filed an amicus curiae brief in support of the
request for preliminary injunction (Doc. 47). Respondents
filed an opposition to the motion (Doc. 58). The States of
California and New Mexico, Intervenor-Respondents here, filed
a joint opposition to preliminary injunction (Doc. 56).
Intervenor-Respondents Natural Resources Defense Council,
Northern Plains Resource Council, Powder River Basin Resource
Council, The Wilderness Society, and Western Organization of
Resource Councils (collectively, "Conservation
Groups") also filed a joint opposition to a preliminary
injunction (Doc. 57). Finally, Petitioner Tri-State
Generation and Transmission Association, Inc. provided a
notice of supplemental evidence (Doc. 59). The Court held an
evidentiary hearing on the matter on September 4, 2019. (Doc.
62.) Having considered the evidence and written testimony
presented, the arguments of counsel, and the record herein,
the Court finds and concludes Petitioners' request for a
preliminary injunction should be granted in part and denied
gas, and coal producers often enter into leases with the
federal government or Indian tribes to produce natural
resources from federal lands, offshore areas, and Indian
lands. The law generally requires lessees to value the fossil
fuels they produce and pay royalties to the federal
government on that production by the end of the calendar
month following the production month. Respondent Office of
Natural Resources Revenue ("ONRR") is a unit of the
U.S. Department of Interior, which is statutorily tasked with
collecting, verifying, and then disbursing the revenues
associated with the production of natural resources on
federal and Indian lands and the Outer Continental Shelf.
2011, ONRR published two advance notices of proposed
rulemaking. The first sought public comments and suggestions
concerning potential changes to how federal oil and gas were
valued for royalty purposes. Federal Oil and Gas
Valuation, 76 Fed. Reg. 30878 (May 27, 2011). The second
requested public comments and suggestions regarding potential
changes to how federal and Indian coal was valued.
Federal and Indian Coal Valuation, 76 Fed. Reg.
30881 (May 27, 2011).
the comment periods as well as six public workshops, ONRR
published a proposed rule in January 2015 ("the Proposed
Rule"), which sought to change how federal oil, gas, and
coal as well as Indian coal would be valued when calculating
royalties. Consolidated Federal OH & Gas and Federal
& Indian Coal Valuation Reform, 80 Fed. Reg. 608
(Jan. 6, 2015). In July 2016, following an extended public
comment period, ONRR then published the final rule ("the
Valuation Rule"), which enacted most of the amendments
first set forth by ONRR in its proposed rule.
Consolidated Federal Oil & Gas and Federal &
Indian Coal Valuation Reform Rule, 81 Fed. Reg. 43338
(July 1, 2016) (to be codified at 30 C.F.R, Parts 1202,
1206). The Valuation Rule effectively changes
how lessees calculate the value of the natural resources in
order to pay royalties on oil, gas, and coal produced from
federal lands and offshore leases as well as coal produced
from Indian lands.
December 29, 2016, Petitioners originally filed challenges to
the Valuation Rule in this Court. However, those Petitions
were voluntarily dismissed in November 2017 due to the
"repeal" of the July 1, 2016 Valuation Rule.
(16-CV-319, Doc. 23).
early 2017, ONRR postponed the Valuation Rule's effective
date and then undertook the rulemaking process to pass
another rule ("the Repeal Rule") that repealed the
Valuation Rule, leaving the former valuation methods
unchanged. Repeal of Consolidated Federal Oil & Gas
and Federal & Indian Coal Valuation Reform, 82 Fed.
Reg. 36934 (Aug. 7, 2017). However, in October 2017, the
States of California and New Mexico, joined by the
Conservation Groups as intervenor-plaintiffs, filed suit in
the Northern District of California to challenge the Repeal
Rule under the APA. State of Cal v. USDOI, No. C
17-5948 SBA (N.D. Cal. Oct. 17, 2017). On March 29, 2019, the
Northern District of California granted summary judgment in
the plaintiffs' favor, vacating the Repeal Rule after
finding ONRR violated the APA when adopting it. Id.
at Doc. 72. This effectively reinstated the now-not-repealed
Valuation Rule. On June 13, 2019, ONRR issued a "Dear
Reporter" letter that announced the Valuation Rule
applies to "all federal oil and gas lessees and all
federal and Indian coal lessees" from January 1, 2017
forward, and requires full compliance to occur by January 1,
2020. (Doc. 23-3 at p. 1.) "This means that lessees must
come into compliance [with the new royalty calculation
methods] retrospectively for the last two and a half years
and prospectively by January 1, 2020." (Doc. 23 at p.
several petitioners before this Court find the Valuation Rule
problematic and burdensome. They seek to set it aside under
the Administrative Procedures Act ("APA"), 5 U.S.C.
§ 706, arguing it is arbitrary and capricious and
exceeds ONRR's authority. Immediately before the Court is
Petitioners' request for a preliminary injunction, which
would prevent them from having to comply with the Valuation
Rule during the pendency of this litigation, thus relieving
Petitioners from the "substantial and unnecessary
burden" of calculating the royalties owed to the federal
government for the development of federal resources under the
new valuation methods.
injunctions in this judicial review of administrative action
are permitted under the APA, 5 U.S.C. § 705, as well as
Federal Rule of Civil Procedure 65(a).
A preliminary injunction has the limited purpose of
preserving the relative positions of the parties until a
trial on the merits can be held. It is an extraordinary
remedy never awarded as of right. A party may be granted a
preliminary injunction only when monetary or other
traditional legal remedies are inadequate, and the right to
relief is clear and unequivocal.
Under Rule 65 of the Federal Rules of Civil Procedure, a
party seeking a preliminary injunction must show: (1) the
movant is substantially likely to succeed on the merits; (2)
the movant will suffer irreparable injury if the injunction
is denied; (3) the movant's threatened injury outweighs
the injury the opposing party will suffer under the
injunction; and (4) the injunction would not be adverse to
the public interest.
DTC Energy Grp., Inc. v. Hirschfeld, 912 F.3d 1263,
1269-70 (10th Cir. 2018) (internal citations and quotation
a showing of probable irreparable harm is the single most
important prerequisite for the issuance of a preliminary
injunction, the moving party must first demonstrate that such
injury is likely before the other requirements' will be
considered." Id. at 1270 (quoting First W.
Capital Mgmt. Co. v. Malamed, 874 F.3d 1136, 1141 (10th
Petitioners have shown likely irreparable
frequently reiterated standard requires plaintiffs seeking
preliminary relief to demonstrate that irreparable injury is
likely in the absence of an injunction."
Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7,
22 (2008) (emphasis in original). "It is also well
settled that simple economic loss usually does not, in and of
itself, constitute irreparable harm; such losses are
compensable by money damages." Schrier v. Univ. of
Colo., 427 F.3d 1253, 1267 (10th Cir. 2005) (quoting
Heideman v. S. Salt Lake City, 348 F.3d 1182, 1189
(10th Cir. 2003)).
first contend they face inevitable, irreparable harm because
they "must expend significant sums to attempt full
compliance with the [Valuation] Rule by ONRR's prescribed
January 1, 2020 date," including the purchase of new or
reprogrammed software and the need to hire and/or train
personnel to recalculate royalties and re-submit reports from
prior years. (Doc. 23 at p. 17.) The parties disagree
drastically concerning the extent of the costs of compliance.
Gregory Gould, the Director of ONRR, testified via
declaration that "ONRR estimates the annual cost of
rereporting across reporters will be $401, 000." (Doc.
58-1 at p. 9.) In stark contrast, Dan Naatz, a Senior Vice
President of the Independent Petroleum Association of America
("IPAA," an amicus in this litigation) testified
via declaration that the IPAA estimates each of its
member-companies faces compliance costs of $100, 000 to $330,
000 for "lost employee time or direct expense for
outside consultants to perform the retrospective reversing
and rebooking," with all IPAA members incurring a
collective compliance cost of at least $100 million. (Doc.
47-2 at p. 6.)
each side in this case has tried to paint the issue as black
or white, courts are split on the question of whether
compliance costs alone can constitute irreparable harm. Some
federal circuit courts have said that economic outlays cannot
amount to irreparable harm:
• Third Circuit: "Any time a corporation complies
with a government regulation that requires corporation
action, it spends money and loses profits; yet it could
hardly be contended that proof of such an injury, alone,
would satisfy the requisite for a preliminary
-A. O. Smith Corp. v. F. T. C, 530 F.2d 515, 527 (3d
• Seventh Circuit: "In addition, injury resulting
from attempted compliance with government regulation
ordinarily is not irreparable harm."
-Am. Hosp. Ass'n v. Harris, 625 F.2d 1328, 1331
(7th Cir. 1980) (citing A O. Smith Corp., 530 F.3d
• Second Circuit: "However, ordinary compliance
costs are typically insufficient to constitute irreparable
-Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112,
115 (2d Cir. 2005) (finding the loss of interest on escrowed
funds did not amount to irreparable harm) (citing Am.
Hosp. Ass'n, 625 F.2d at 1321, and A O. Smith
Corp., 530 F.2d at 527-28).
circuits have taken a more relaxed approach when the movants
are barred from the possibility of recovering their monetary
costs down the road:
• Eighth Circuit: "The threat of unrecoverable
economic loss, however, does qualify as irreparable
-Iowa Utilities Bd. v. F.C.C., 109 F.3d 418, 426
(8th Cir. 1996).
• Eleventh Circuit: "In the context of preliminary
injunctions, numerous courts have held that the inability to
recover monetary damages because of sovereign immunity
renders the harm suffered irreparable."
-Odebrecht Constr., Inc. v. Sec'y, Fla. Dep't of
Transp., 715 F.3d 1268, 1289 (11th Cir. 2013)
• Fifth Circuit: "The tremendous costs of the
emissions controls impose a substantial financial injury on
the petitioner power companies which, in this circuit,
'may also be sufficient to show irreparable injury.'
Enter. Int'l lnc. v. Corp. EstatalPetrolera
Ecuatoriana, 762 F.2d 464, 472-73 (5th Cir. 1985).
Indeed 'complying with a regulation later held invalid
almost always produces the irreparable harm of
nonrecoverable compliance costs.' Thunder Basin Coal
Co. v. Reich, 510 U.S. 200, 220-21, 114 S.Ct. 771, 127
L.Ed.2d 29 (1994) (Scalia, J., concurring in part and in the
judgment). When determining whether injury is irreparable,
'it is not so much the magnitude but the irreparability
that counts....' Enter. Int'l, 762 F.2d at
472. No mechanism here exists for the power companies to
recover the compliance costs they will incur if the Final
Rule is invalidated on the merits."
-Texas v. United States Envtl. Prot. Agency, 829
F.3d 405, 433-34 (5th Cir. 2016) (emphasis added).
• Ninth Circuit: "Economic harm is not normally
considered irreparable. However, such harm is irreparable
here because the states will not be able to recover monetary
damages connected to the IFRs [interim final rules]."
-California v. Azar,
911 F.3d 558, 581 (9th Cir.
2018), cert, denied sub nom. Little Sisters of the Poor
Jeanne Jugan Residence v. California,139 ...