Hayes, Trustee for Paul B. Hayes Family Trust, Dated April 30, 2010 v. Bernhardt, Case No. 16-CV-00615-JED-FHM

499 F.Supp.3d 1071

David P. HAYES, TRUSTEE FOR the PAUL B. HAYES FAMILY TRUST, DATED APRIL 30, 2010, Plaintiff,

v.David L. BERNHARDT, in his official capacity as Secretary of the United States Department of Interior;¹ United States Bureau of Indian Affairs; Darryl LaCounte, in his official capacity as the Director of the United States Bureau of Indian Affairs; Warrior Exploration & Production, LLC ; Performance Group, LLC, Defendants.

Case No. 16-CV-00615-JED-FHM

United States District Court, N.D. Oklahoma.

Signed November 2, 2020

Donald A. Lepp, Garry Michael Gaskins, II, Gentner Frederick Drummond, Logan Lawrence James, Drummond Law Firm, Tulsa, OK, for Plaintiff.

Peter Kryn Dykema, Washington, DC, Bruce Wayne Robinett, Jess Morgan Kane, Rick Don Tucker, Robinett King Law Office, Bartlesville, OK, for Defendants.

OPINION AND ORDER

JOHN E. DOWDELL, CHIEF JUDGE

Before the Court is the Second Motion to Dismiss (Doc. 22) filed by defendants Warrior Exploration & Production, LLC and Performance Group, LLC (the "non-federal defendants").² The Court considered the plaintiff's response (Doc. 25), defendants’ reply (Doc. 26), and arguments at the hearing conducted on the motion. In their dismissal motion, the non-federal Defendants request dismissal based upon three separate grounds. First, they argued that a ruling would be improper while a similar case, Hayes I , Case No. 14-CV-495-GKF-PJC, was on appeal. Second, they contend that the Osage Minerals Council (OMC), which is the lessor and the entity that is legally authorized to make decisions regarding the mineral rights which the United States holds in trust for the benefit of the Osage Tribe, is a required and indispensable party who may not be joined due to its sovereign status. Third, they argue that Hayes does not have standing.

I. Background

The plaintiff, David Hayes, brings this case under the Administrative Procedure Act (APA) seeking judicial review of the Bureau of Indian Affairs’ (BIA) approval of oil and gas leases and associated drilling permits affecting real property owned by Hayes in Osage County. Hayes alleges that the BIA's approval of the lease and permits violated the National Environmental Policy Act (NEPA).

Hayes is the owner of approximately 475 acres of land located in Osage County. He lives on this land with his wife and daughter. The property is divided into three different tracts. On February 16, 2012, the Osage Nation, which controls the mineral rights to the land, entered into a lease (Lease 22411) with Chaparral Energy, LLC that covered Tract One. This lease was approved by the Superintendent of the Osage Agency within the BIA, which manages the Osage Nation's mineral estate. Chaparral submitted Applications for Permit to Drill (APDs) for six wells and one salt water disposal well pursuant to Lease 22411. All of these were approved by the BIA, and the plaintiff alleges that the approval was made without complying with NEPA.

The OMC and Chaparral also entered into a lease (Lease 22770) covering Tract Two. This lease was approved on February 6, 2013. Chaparral submitted APDs pursuant to Lease 22770, which were all approved by the Osage Agency on April 29, 2014. Chaparral submitted an amended APD for one well (Black Dog's Band #2-36). The amended APD moved the well a hundred feet to the west. The amended APD was approved by the Osage Agency on June 11, 2014. The plaintiff alleges those approvals were in violation of NEPA.

In 2014, Hayes filed Hayes I in order to challenge Lease 22770 and the drilling permits under NEPA. While Hayes I was pending, Chaparral began marketing the leases. Lease 22411 and 22770 were purchased on or about August 31, 2015 by Warrior Exploration. On or about September 1, 2015, Chaparral and Warrior Exploration entered into an Interim Operating Agreement designating Performance Group, LLC as operator of the Leases. Performance has been working the wells on Hayes's property. People come onto Hayes's property almost every day to check the wells and come three or four times a week to pick up oil. New wells have recently been staked on Hayes's property.

In Hayes I , Judge Frizzell denied the OMC's motion to dismiss based upon the case proceeding without an indispensable party and the judge ruled in favor of the plaintiff on the merits. The OMC appealed the denial of its dismissal motion, and the United States appealed Judge Frizzell's decision on the merits. While the appeals were pending, the BIA vacated the approvals of Lease Nos. 22411 and 22770, but retroactively approved the leases pursuant to a new analysis. The United States then voluntarily dismissed its appeal on the merits, and the OMC moved to dismiss its appeal as moot. The Tenth Circuit granted the OMC's request to dismiss its appeal as moot and remanded the case to the district court with directions to vacate its previous orders on the merits. The Tenth Circuit determined that, because the BIA had retroactively approved the leases based on a new NEPA analysis, the original approval was superseded, and so the case was moot.

In this case, Hayes claims that the approval of the leases and of the wells violated NEPA. He further argues that there are deficiencies in the Programmatic Environmental Assessment for Leasing Activities (Leasing PEA), Finding of No Significant Impact (FONSI), and Determination of NEPA Adequacy (DNA), which the BIA used to justify its decision to retroactively approve the leases.

II. Discussion

A. Hayes I has been decided.

The non-federal defendants previously argued that the case should be dismissed or stayed pending the appeal of Hayes I. However, Hayes I has now been decided. The Tenth Circuit determined that, because the BIA had retroactively approved the leases based on a new NEPA analysis, the original approval was superseded, and so the case was moot. The defendants represent that their first argument for dismissal is no longer applicable and they no longer wish to pursue that argument. Accordingly, the Court will not further consider that argument.

B. Rule 19 analysis

Under Rule 19 of the Federal Rules of Civil Procedure, a party is an indispensable party if "(A) in that person's absence, the court cannot accord complete relief among existing parties; or, (B) that person claims an interest relating to the subject of the action and is so situated that disposing of the action in the person's absence may" either "(i) as a practical matter impair or impede the person's ability to protect the interest; or," "(ii) leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations because of the interest." Fed. R. Civ. P. 19(a)(1). A party who fulfills either (A) or (B) is thus a required party and must be joined if feasible. "The inquiry ... is mainly one of prejudice." Grice v. CVR Energy, Inc. , 921 F.3d 966, 969 (10th Cir. 2019). "If ‘one or more parties will be unfairly prejudiced by dismissing’ a defendant, the ‘court must dismiss the case in its entirety for lack of jurisdiction.’ " Id. (quoting Ravenswood Inv. Co., L.P., v. Avalon Corr. Servs. , 651 F.3d 1219, 1226 (10th Cir. 2011)).

Where a required party cannot be joined, "the court must determine whether, in equity and good conscience, the action should proceed among the existing parties or should be dismissed." Fed. R. Civ. P. 19(b). The non-federal defendants argue that the OMC fulfills both criteria (A) and (B) under Rule 19(a)(1) and is a required party without which this case should not proceed.

1. OMC is a required party.

Here, because the OMC is part of the Osage Nation, and thus possesses sovereign immunity, its joinder is not feasible. The Court will therefore consider whether the OMC is a required party and, if so, whether it is indispensable. The non-federal defendants argue that the OMC has an interest in this case for both economic and sovereignty reasons, rendering it a required party. First, they argue that it "is a fundamental principle that ‘in an action to set aside a lease or a contract, all parties affected by the determination of the action are indispensable.’ " (Doc. 14 at 5, citing Jicarilla Apache Tribe v. Hodel , 821 F.2d 537, 540 (10th Cir. 1987) ). Second, they argue that the "OMC has collected value from the leases at issue here, performed and planned government functions in reliance thereon, and its members have survived in part from the operations for over 100 years. The OMC's interests related to this action are significant, consistent, and predictable." (Doc. 14 at 6). Also, they argue that invalidating "these leases will necessarily disrupt the flow of the royalties, taxes, employment incomes, and economic multiplier effect benefits the OMC will otherwise realize." (Doc. 14 at 8). Furthermore, they argue that the OMC has a sovereignty interest because this "litigation threatens to impair the OMC's sovereign capacity to negotiate contracts and, in general, to govern the Osage Mineral Estate." (Doc. 14 at 7).

In response, Hayes argues that the OMC will not have its interests impaired for two reasons. First, he argues that "a proposed lease is legally ineffective until such time that the Superintendent complies with NEPA and provides a valid approval.... Accordingly, this lawsuit does not infringe upon the OMC's right to negotiate, sign or submit the proposed lease for approval." (Doc. 25 at 6). Second, Hayes argues that the cases cited for the OMC being a required party do not apply because none "of those cases involves a split mineral estate with an innocent landowner who is not a party or signatory to the lease or contracts.... None of the cases cited ... has weighed the alleged sovereign interests of the tribe against the rights of the innocent landowner." (Doc. 25 at 6). He also argues that one of those cases in particular, Republic of the Philippines v. Pimentel , 553 U.S. 851, 128 S.Ct. 2180, 171 L.Ed.2d 131 (2008), is distinguishable from the facts in this case because it did not involve a...