Devon Energy Prod. Co. v. Mosaic Potash Carlsbad, Inc.

693 F.3d 1195

DEVON ENERGY PRODUCTION COMPANY, L.P., Plaintiff–Appellant,

v.MOSAIC POTASH CARLSBAD, INC., a Delaware Corporation, Defendant–Appellee.

No. 11–2026.

United States Court of Appeals, Tenth Circuit.

Aug. 22, 2012.

Harold L. Hensley, Jr., Hinkle, Hensley, Shanor & Martin, LLP, Midland, TX, for Plaintiff–Appellant.

Charles C. High, Jr., Kemp Smith LLP (Clara B. Burns and Jose A. Howard–Gonzalez, Kemp Smith LLP, with him on the brief), El Paso, TX, for Defendant–Appellee.

Before O'BRIEN, GILMAN ^* and HOLMES, Circuit Judges.

HOLMES, Circuit Judge.

Plaintiff–Appellant Devon Energy Production Company, L.P. (“Devon”), an oil and gas production company, appeals from the judgment of the United States District Court for the District of New Mexico, which dismissed Devon's declaratory-judgment action against Defendant–Appellee Mosaic Potash Carlsbad, Inc. (“Mosaic”), a potash mining company,¹ for lack of subject-matter jurisdiction. More specifically, under Federal Rule of Civil Procedure 57, Devon sought a declaratory judgment that federal law completely preempted Mosaic's anticipated state-law claims emanating from Devon's unauthorized drilling in a federally managed area of New Mexico known as the “Potash Area,” and that the only remedies available to Mosaic were derived from the federal administrative and judicial remedies of the Administrative Procedure Act (“APA”) and certain regulatory provisions of the U.S. Department of the Interior that govern oil, gas, and potash leasing and development within the Potash Area. Devon alleged that the district court had federal-question jurisdiction over its declaratory-judgment action under 28 U.S.C. § 1331.

The district court concluded that there was no federal-question jurisdiction to support Devon's action and dismissed its complaint, and subsequently denied Devon's motion to alter or amend the judgment under Federal Rule of Civil Procedure 59(e) (“Rule 59(e) motion”). We affirm.

I

We start by describing the Potash Area that is at the center of this dispute. Eddy and Lea Counties in New Mexico contain vast amounts of subsurface potash and also oil and gas reserves. The U.S. Department of the Interior's Bureau of Land Management (“BLM”) manages the Potash Area, which encompasses approximately 497,000 acres in Eddy and Lea Counties. In an effort to allow for the prospecting, development, and production of potash and oil and gas resources within the Potash Area, the BLM issues leases that allow various companies to mine potash and to drill for oil and gas.² To accomplish this goal, the BLM has implemented rules as outlined in the BLM's “1986 Secretarial Order,” which was issued under the Mineral Leasing Act of 1920 (“MLA”), 30 U.S.C. §§ 181– 196. SeeOil, Gas and Potash Leasing and Development Within the Designated Potash Area of Eddy and Lea Counties, New Mexico, 51 Fed.Reg. 39,425 (Oct. 28, 1986), corrected52 Fed.Reg. 32,171 (Aug. 26, 1987) (the “1986 Order”).

The 1986 Order contains provisions addressing the issuance of both potash and oil and gas leases. See 1986 Order § 3(III)(A), (C). Most relevant to this appeal are certain conditions imposed, by stipulation, on the recipients of oil and gas leases. The 1986 Order states that “[d]rilling for oil and gas shall be permitted only in the event that the lessee establishes ... 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.” Id. § 3(III)(A)(1). Further, under the 1986 Order, “[n]o wells shall be drilled for oil or gas at a location which ... 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.” Id. § 3(III)(A)(2).

In March of 2005, Devon submitted an Application to Permit Drilling (“APD”) to the BLM to drill a new well in the Potash Area, which was labeled the “Apache Well.” Aplt.App. at 127 (Dist. Ct. Mem. Op. & Order, filed Oct. 19, 2010). The BLM denied the APD because of “mining impact,” ³ but it informed Devon that it would approve the well if it were moved to a location between two previously drilled wells. Id. at 5–6 (Compl., filed July 15, 2010); see id. at 127–28. Devon agreed to move the Apache Well to the new location. However, rather than drill at the approved location, Devon incorrectly placed the well at the original location that the BLM had never approved.

In February 2006, Devon discovered its mistake and reported it to the BLM. Thereafter, Devon requested approval of the Apache Well, as drilled, in the original location. The next month, after performing an environmental assessment, the BLM approved the Apache Well, as drilled. Upon learning of Devon's mistake, Mosaic contacted Devon to assert that it had wasted mineable potash by drilling at the wrong location and caused Mosaic damages. The parties attempted to negotiate their dispute, but eventually those discussions reached an impasse.

In July 2010, Devon filed suit against Mosaic in the United States District Court for the District of New Mexico seeking declaratory relief under Federal Rule of Civil Procedure 57. In its complaint, Devon anticipated that Mosaic would file suit against it for money damages under state law, and therefore it sought a declaration that (1) “federal law has completely pre-empted all oil and gas and potash operationsand activities with regard to the location and drilling of oil and gas wells and mining operations on the lands and leases involved in this controversy,” and (2) “the only remedies available to Mosaic are the federal administrative and judicial remedies under the Administrative Procedure Act and the Secretary of the Interior's 1986 Order ..., none of which include any monetary claim for damages.” Aplt.App. at 1–2. Devon asserted that the court had federal-question jurisdiction under 28 U.S.C. § 1331.

Mosaic responded by filing a motion to dismiss for lack of subject-matter jurisdiction. Mosaic argued that the district court lacked jurisdiction over Devon's claim because, as relevant here, the Complaint “fail[ed] to assert a federal question.” Aplt.App. at 27 (Def.'s Rule 12(b)(1) Mot. to Dismiss for Lack of Subject Matter Jurisdiction, filed Aug. 11, 2010). Mosaic maintained that any federal issue that may arise would be only by way of a defense asserted by Devon, and that a defense was insufficient to support federal-question jurisdiction.

The district court agreed with Mosaic and dismissed Devon's complaint. It first concluded that the lack of any private cause of action in the MLA precluded a finding of complete preemption. It then rejected Devon's argument that the district court had “federal question jurisdiction because Mosaic's claims require[d] [it] to construe federal law.” Id. at 136 (quoting Dist. Ct. Doc. No. 11, at 20 (Pl.'s Mem. in Resp. to Def.'s 12(b)(1) Mot. to Dismiss for Lack of Subject–Matter Jurisdiction, filed Aug. 26, 2011)) (internal quotation marks omitted). The district court noted that resolution of Mosaic's claims would not require a court to decide whether the BLM's approval of the Apache Well, as drilled, was improper because “approval is not an element of Mosaic's cause of action as it at most is only a defense to Mosaic's state law claims.” Id. at 136–37.

Following the district court's dismissal of Devon's complaint, Mosaic then filed its own complaint in New Mexico state court, raising state-law claims for trespass, negligence, and prima-facie tort. In response, Devon filed in federal court a Rule 59(e) motion to alter or amend the judgment, arguing that the district court should vacate its order because of two “new” pieces of evidence—namely, Mosaic's state-court complaint and documents that Devon had received from the BLM through a Freedom of Information Act (“FOIA”) request which detailed the agency's decisionmaking process in approving the Apache Well site post-drilling. In its motion, Devon argued (again) that federal-question jurisdiction attached in that Mosaic's state-law claims “require[ ]” a construction and application of federal law because a court would have to “resolve the substantial federal question of whether Devon's entry onto the federally owned and managed land was unauthorized by the United States” and whether Mosaic suffered lost potash deposits as determined by federal law. Aplt.App. at 142 (Pl.'s Opposed Rule 59(e) Mot. & Br. to Alter or Amend the Court's Order Dismissing Pl.'s Compl., filed Nov. 16, 2010).

The district court denied Devon's motion. The court held that the substance—if not the specifics—of Devon's “new evidence” was already before the court when it rendered its original decision, and therefore did not warrant reconsideration. Further, it concluded that Devon's legal argument—related to jurisdiction based on a substantial federal issue—was “improper under Rule 59(e)” because Devon was simply “attempting to ‘relitigate old matters, or to raise arguments ... that could have been raised prior to the entry of judgment.’ ” Id. at 292 (Mem. Op. & Order Den. Devon Energy Prod. Co.'s Rule 59(e) Mot., filed Jan. 24, 2011) (quoting Exxon Shipping Co. v. Baker, 554 U.S. 471, 485 n. 5, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008)); see also id. (“Devon appears to merely be using Rule 59(e) to fully develop an argument that it mentioned only in passing in its initial briefing on this issue in its Response to Mosaic's Motion to Dismiss.”).

In an abundance of caution, however, the district court went on to consider the merits of Devon's claim. It acknowledged that, as Devon argued, the Supreme Court's decision in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), set forth the appropriate jurisdictional test—namely, “does [the] state-law claim necessarily raise a stated federal issue, actually disputed and substantial, which...