IN RE DEPT. OF ENERGY STRIPPER WELL EXEMPTION LIT.

956 F.2d 282

In re DEPARTMENT OF ENERGY STRIPPER WELL EXEMPTION LITIGATION ANADARKO PRODUCTION COMPANY, Appellant, v. STATE OF NEW MEXICO, Appellee.

No. 10-89.

Temporary Emergency Court of Appeals.

Argued September 12, 1991.

Decided January 24, 1992.

Joseph W. Kennedy, Robert W. Coykendall, Mark A. Ohlsen, and Gerald N. Capps, Morris, Laing, Evans, Brock and Kennedy, Chartered, Wichita, Kansas, James T. Ward, Jr., Anadarko Petroleum Co., Houston, Tex. were on the briefs for appellant.

Dahl H. Harris, Sp. Asst. Atty. Gen., Tom Udall, Atty. Gen., Christopher D. Coppin, Asst. Atty. Gen., State of N.M., Santa Fe, N.M. were on the brief for appellee.

Before GRANT, METZNER and PECK, Judges.

JOHN W. Judge:

Appellant Anadarko Production Company Anadarko appeals the district court's dismissal of its cross-claim against the State of New Mexico. Anadarko contends that the district court had jurisdiction over New Mexico by reason of the district court's original jurisdiction in this action and by reason of New Mexico's voluntary intervention in this case; Anadarko alleges that New Mexico waived its claims of immunity under the Eleventh Amendment to the United States Constitution. The State of New Mexico argues that its intervention in this suit for the limited purpose of asserting claims against the escrow fund did not operate as a waiver of the State's Eleventh Amendment immunity. For the reasons presented below, this Court affirms the district court's dismissal of Anadarko's cross-claim.

I. FACTS

In 1978 Anadarko filed suit against the Department of Energy DOE seeking to enjoin DOE from enforcing the civil and criminal penalties of 10 C.F.R. 205.203 and Federal Energy Administration FEA Ruling 1974-29, 39 Fed.Reg. 44,414 (Dec. 24, 1974). This Ruling concerned the determination that injection wells were not "stripper wells"¹ for the purpose of calculating an oil property's eligibility for stripper well pricing. Anadarko's action was consolidated with other suits in the United States District Court for the District of Kansas. See In re Department of Energy Stripper Well Exemption Litigation, 472 F.Supp. 1282 (J.P.M.L.1979) (No. 378). The district court in Kansas enjoined the DOE from enforcing the Ruling; the court permitted oil producers to sell oil from injection wells at stripper well prices, which were higher than the regulated oil prices. Nevertheless, the court required the oil producers to deposit into an escrow fund the difference between the prices received on the open market and the regulated prices. The Temporary Emergency Court of Appeals TECA subsequently upheld FEA Ruling 1974-29 in In re Department of Energy Stripper Well Exemption Litigation, 690 F.2d 1375 (Temp.Emer.Ct.App.1982), cert. denied sub nom., Energy Reserves Group, Inc. v. Hodel, 459 U.S. 1127, 103 S.Ct. 763, 74 L.Ed.2d 978 (1983), and ruled on the merits against oil producers such as Anadarko.

After TECA's decision, the Commonwealth of Pennsylvania, the State of New Mexico and other states intervened as Plaintiffs in the litigation claiming their shares in the distribution of the escrow fund. In 1986 the United States District Court for the District of Kansas approved a "Final Settlement Agreement" in which the parties agreed to compromise and settle all claims to the escrow fund. See In re Department of Energy Stripper Well Exemption Litigation, 653 F.Supp. 108 (D.Kan.1986), aff'd, 855 F.2d 865 (Temp. Emer.Ct.App.1988). The Final Settlement Agreement did not address issues related to the extent of oil producers' liability to the escrow fund, however. Id., 653 F.Supp. at 114.

On September 23, 1988 DOE counter-claimed against Anadarko and other oil producers, alleging that the producers had not deposited sufficient funds into the escrow account to satisfy their liability. On December 21, 1990 Anadarko answered the counterclaim and filed a cross-claim against the State of New Mexico. In its cross-claim Anadarko alleged that its deficiencies in payments were attributable in part to oil taken "in kind" by the State of New Mexico as a royalty interest owner of the Langley Mattix Pennrose Sand Unit. Anadarko operated this Unit, which had been granted stripper well status at one time by counting its injection wells as stripper wells.

II. APPELLATE JURISDICTION

On April 19, 1991 the United States District Court for the District of Kansas granted New Mexico's motion to dismiss Anadarko's cross-claim. 763 F.Supp. 498. The district court held that the Eleventh Amendment to the United States Constitution barred Anadarko's action.

In the 1971 Amendments to the Economic Stabilization Act ESA Congress vested TECA with jurisdiction "of all appeals from the district courts of the United States in cases and controversies arising under this title or under regulations or orders issued thereunder." 12 U.S.C. § 1904 note, § 211(b)(2) (incorporated in section 5(a)(1) of the Emergency Petroleum Allocation Act EPAA, 15 U.S.C. § 754(a)(1)).

TECA's appellate jurisdiction is narrowly limited to the determination of issues arising under the Economic Stabilization Act ESA, the Emergency Petroleum Allocation Act EPAA, and their corresponding regulations. United States Department of Energy v. Brimmer, 776 F.2d 1554, 1556 (Temp.Emer.Ct.App.1985), cert. denied sub nom., Inexco Oil Co. v. United States Department of Energy, 475 U.S. 1045, 106 S.Ct. 1261, 89 L.Ed.2d 571 (1986). An issue arising under these Acts is one which involves the construction, applicability or effect of the Acts or the regulations. Isla Petroleum Corp. v. Puerto Rico Department of Consumer Affairs, 811 F.2d 1511, 1513 (Temp.Emer.Ct.App.1986), rev'd on other grounds, 485 U.S. 495, 108 S.Ct. 1350, 99 L.Ed.2d 582 (1988). Anadarko alleges that its claim against the State of New Mexico arises out of the State's intervention in litigation involving the distribution of the escrow fund. New Mexico claims it did not waive its Eleventh Amendment immunity by intervening in this litigation. The question presented to this Court is whether a state has waived its immunity by intervening to participate in the distribution of the escrow fund created to facilitate settlement of claims arising under the ESA, the EPAA, and regulations promulgated under these Acts. This Court has previously considered the applicability of the Eleventh Amendment in the context of stripper well litigation. In our previous decision we held that by participating in the Final Settlement Agreement, the State of Alaska neither waived its sovereign immunity nor consented to be sued. See In re Department of Energy Stripper Well Exemption Litigation (Atlantic Richfield v. Alaska), 945 F.2d 1575, 1583-84 (Temp. Emer.Ct.App.1991). Because this case presents an issue arising under ESA, EPAA, or regulations promulgated thereunder, this Court has appellate jurisdiction over the appeal of the district court's decision.

III. DISCUSSION

Because District Judge Theis dismissed Anadarko's cross-claim based on Eleventh Amendment grounds, this Court conducts de novo review of the Judge's legal conclusions. Highland Petroleum, Inc. v. United States Department of Energy, 798 F.2d 474, 476-477 (Temp.Emer.Ct.App.1986).

The Eleventh Amendment of the United States Constitution provides that:

(t)he Judicial power of the United States shall not be construed to extend to any suit in law or in equity commenced or prosecuted against any one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State.

In the absence of consent, the Eleventh Amendment serves as a general bar to suits brought in federal courts against a state or its agencies or departments. See Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 100, 104 S.Ct. 900, 908, 79 L.Ed.2d 67 (1984). Federal courts have long recognized, however, that States may waive their immunity, and consent to suit in federal court. Atascadero State Hospital v. Scanlon, 473 U.S. 234, 238, 105 S.Ct. 3142, 3145, 87 L.Ed.2d 171 (1985). Nevertheless, federal courts will find an express waiver of Eleventh Amendment immunity only when stated "by the most express language or by such overwhelming implications from the text as will leave no room for any other reasonable construction." Edelman v. Jordan, 415 U.S. 651, 673, 94 S.Ct. 1347, 1361, 39 L.Ed.2d 662 (1974).

Federal courts have provided a tough standard for finding an implied waiver of Eleventh Amendment immunity as well. Federal courts have jurisdiction over a counterclaim brought against a state only if the counterclaim arises from the same event underlying the state's cause of action, and only if the claimant asserts his or her claim defensively by way of recoupment to defeat or diminish the state's recovery. Woelffer v. Happy States of America, Inc., 626 F.Supp. 499, 502 (N.D.Ill.1985).

Anadarko argues that the State of New Mexico waived its immunity by intervening in this action as a claimant to the escrow fund. The district court found that New Mexico did not intervene to litigate the merits of the action. Rather, the court determined that New Mexico intervened merely to stake a claim for a small portion of the escrow fund. The district court held that New Mexico's intervention for this limited...