Do Administrative Proceedings Count?

BP America Production Co. v. Burton

The US Government can lease out public land for energy development, for a fee of course, through Minerals Management Service (MMS). The companies to which the land is leased is required to calculate the royalties and pay them, but may be audited. If MMS determines that the companies have underpaiad it will issue an order for payment (which carries a $10,000 per day fine), which can be appealed to the head of the MMS. In 1982 Congress enacted a law revising the accounting processes and directing the Secretary of the Interior to “audit and reconcile, to the extent practicable, all current and past lease accounts…” Then, in 1996, Congress enacted a prospective statute of limitations for any “judicial proceeding or demand” for royalties arising under a federal oil or gas lease and covering “every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or in fact” and barring it unle4ss “the complaint is filed within six years after the right of action accrues or within one year after final decisions have been rendered in applicable administrative proceedings…” The question here is whether this statute of limitations governs MMS administrative payment orders concerning pre-1996 production.

For years Amoco calculated royalties based on the value of the gas when it was pumped, but in 1996 MMS directed Amoco to calculate royalties based on the value of the gas after it was treated, and to pay additional royalties for the period of 1989 to 1996. On appeal the Assistant Secretary of the Interior held that the statue of limitations was inapplicable.

The statute of limitations applies to any “action for money damages,” commenced by filing a “complaint,” and the statute runs from the point when a “right of action accrues.” These terms by definition apply in the context of a judicial proceeding, and not necessarily in the context of an administrative proceeding. A “right of action” is defined as “the right to being suit; a legal right…” where “suit” means “any proceeding … in a court of justice.” “Complaint[s]” are filed in judicial, not administrative, proceedings (these laws were, after all, written by lawyers). Petitioners cite many cases where they argue the word “action” encompasses administrative proceedings, but the Court dismisses these because in each instance the word is somehow qualified either directly or implicitly. Similarly, the few cases where the term “complaint” is applied to administrative proceedings is discarded because, in any case, a complaint in that context imposes no legal obligation and because statutes of limitations are generally construed narrowly.

Also, to the argument that a section explicitly providing for “administrative offset[s]” (which is, as far as I can tell, a mechanism whereby the Government withholds payment of a debt to recoup payment that another party owes) the Court points out that the section at issue here was added 16 years later, and in response to a concern that the Government could not use such a mechanism to recover a debt which a Court was no longer empowered to adjudicate.

As to suggested inconsistencies that this interpretation would result in, such as the requirement that oil companies maintain records for 7 years (the length of the statute of limitations) where those records could be necessary for an indefinite period of time, the Court proffers other suggested inconsistencies that would result from petitioner’s interpretation. General policy questions are then given brief consideration; guess how much they affected the decision.