BP America Production Co. v. Burton
Encyclopedia
BP America Production Co. v. Burton, 549 U.S. 84 (2006), was a United States Supreme Court
case about whether a statute of limitations
on government actions for contract
claims applies to actions by a federal administrative agency to recover royalties on federal oil
and gas
leases. After two members recused themselves, the court ruled unanimously that it does not apply, in an opinion by Justice Samuel Alito
.
(MLA) authorizes the Department of the Interior
to lease public lands to private parties for the production of oil and gas. In 1982, Congress enacted the Federal Oil and Gas Royalty Management Act (FOGRMA) to address inadequacies with the system of accounting for royalties due on oil and gas produced from lease sites. FOGRMA ordered the Secretary of the Interior to audit those leases and collect what was owed the government. The Secretary, in turn, has assigned these duties to the Department of the Interior’s Minerals Management Service
(MMS).
If MMS concludes that the lessee owes royalties greater than what it has paid, MMS issues an order requiring payment of the amount due. There is no dispute that a lawsuit in court to recover royalties owed is covered by a general six-year statute of limitations for Government contract actions.
, holds gas leases for lands in New Mexico
’s and Colorado
's San Juan Basin
. BP’s predecessor, Amoco Production Co.
, first entered into these leases nearly fifty years ago, and these leases require the payment of a royalty. For years, Amoco calculated the royalty as a percentage of the value of the gas as of the moment it was produced at the well. In 1996, MMS sent lessees a letter directing that royalties should be calculated based not on the value of the gas at the well, but on the value of the gas after it was treated to meet the quality requirements for introduction into the Nation’s mainline pipelines. Therefore, MMS in 1997 ordered payment of $32,264,570 in additional royalties (and interest) for the period from January 1989 through December 1996 to cover the difference.
Amoco sought review by the United States District Court for the District of Columbia
, which agreed with the Assistant Secretary that the statute of limitations did not apply. The D.C. Circuit Court of Appeals
affirmed the district court's ruling. The Supreme Court granted certiorari to resolve a circuit split between the D.C. Circuit and the Tenth Circuit
.
for government actions for monetary damages in (a) govern the issuance of administrative payment orders, as opposed to the government's filing of a complaint in court?
The respondent relied on the language of the statute to argue that "action" meant an action in court, not an administrative proceeding.
intended these terms to apply more broadly to administrative proceedings. On the contrary, § 2415(a) distinguishes between judicial and administrative proceedings. Section 2415(a) provides that an 'action' must commence 'within one year after final decisions have been rendered in applicable administrative proceedings.' Thus, Congress knew how to identify administrative proceedings and manifestly had two separate concepts in mind when it enacted § 2415(a)."
Justice Alito further states that the situation is subject to the traditional rule quod nullum tempus occurrit regi
—time does not run against the King. "A corollary of this rule is that when the sovereign elects to subject itself to a statute of limitations, the sovereign is given the benefit of the doubt if the scope of the statute is ambiguous."
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
case about whether a statute of limitations
Statute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
on government actions for contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
claims applies to actions by a federal administrative agency to recover royalties on federal oil
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
and gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
leases. After two members recused themselves, the court ruled unanimously that it does not apply, in an opinion by Justice Samuel Alito
Samuel Alito
Samuel Anthony Alito, Jr. is an Associate Justice of the U.S. Supreme Court. He was nominated by President George W. Bush and has served on the court since January 31, 2006....
.
Legal background
The Mineral Leasing Act of 1920Mineral Leasing Act of 1920
The Mineral Leasing Act of 1920 et seq. is a United States federal law that authorizes and governs leasing of public lands for developing deposits of coal, petroleum, natural gas and other hydrocarbons, in addition to phosphates, sodium, sulphur, and potassium in the United States...
(MLA) authorizes the Department of the Interior
United States Department of the Interior
The United States Department of the Interior is the United States federal executive department of the U.S. government responsible for the management and conservation of most federal land and natural resources, and the administration of programs relating to Native Americans, Alaska Natives, Native...
to lease public lands to private parties for the production of oil and gas. In 1982, Congress enacted the Federal Oil and Gas Royalty Management Act (FOGRMA) to address inadequacies with the system of accounting for royalties due on oil and gas produced from lease sites. FOGRMA ordered the Secretary of the Interior to audit those leases and collect what was owed the government. The Secretary, in turn, has assigned these duties to the Department of the Interior’s Minerals Management Service
Minerals Management Service
The Bureau of Ocean Energy Management, Regulation and Enforcement , formerly known as the Minerals Management Service , was an agency of the United States Department of the Interior that managed the nation's natural gas, oil and other mineral resources on the outer continental shelf...
(MMS).
If MMS concludes that the lessee owes royalties greater than what it has paid, MMS issues an order requiring payment of the amount due. There is no dispute that a lawsuit in court to recover royalties owed is covered by a general six-year statute of limitations for Government contract actions.
Facts
The petitioner, BP America Production Co.BP
BP p.l.c. is a global oil and gas company headquartered in London, United Kingdom. It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "supermajors"...
, holds gas leases for lands in New Mexico
New Mexico
New Mexico is a state located in the southwest and western regions of the United States. New Mexico is also usually considered one of the Mountain States. With a population density of 16 per square mile, New Mexico is the sixth-most sparsely inhabited U.S...
’s and Colorado
Colorado
Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...
's San Juan Basin
San Juan Basin
The San Juan Basin is a geologic structural basin in the Four Corners region of the Southwestern United States; its main portion covers around , encompassing much of northwestern New Mexico, southwest Colorado, and parts of Arizona and Utah....
. BP’s predecessor, Amoco Production Co.
Amoco
Amoco Corporation, originally Standard Oil Company , was a global chemical and oil company, founded in 1889 around a refinery located in Whiting, Indiana, United States....
, first entered into these leases nearly fifty years ago, and these leases require the payment of a royalty. For years, Amoco calculated the royalty as a percentage of the value of the gas as of the moment it was produced at the well. In 1996, MMS sent lessees a letter directing that royalties should be calculated based not on the value of the gas at the well, but on the value of the gas after it was treated to meet the quality requirements for introduction into the Nation’s mainline pipelines. Therefore, MMS in 1997 ordered payment of $32,264,570 in additional royalties (and interest) for the period from January 1989 through December 1996 to cover the difference.
Procedural history
Amoco appealed the order, disputing the new interpretation of its royalty obligations and arguing that the payment order was in any event barred in part by the six-year statute of limitations. The Assistant Secretary of the Interior denied the appeal and ruled that the statute of limitations was inapplicable.Amoco sought review by the United States District Court for the District of Columbia
United States District Court for the District of Columbia
The United States District Court for the District of Columbia is a federal district court. Appeals from the District are taken to the United States Court of Appeals for the District of Columbia Circuit The United States District Court for the District of Columbia (in case citations, D.D.C.) is a...
, which agreed with the Assistant Secretary that the statute of limitations did not apply. The D.C. Circuit Court of Appeals
United States Court of Appeals for the District of Columbia Circuit
The United States Court of Appeals for the District of Columbia Circuit known informally as the D.C. Circuit, is the federal appellate court for the U.S. District Court for the District of Columbia. Appeals from the D.C. Circuit, as with all the U.S. Courts of Appeals, are heard on a...
affirmed the district court's ruling. The Supreme Court granted certiorari to resolve a circuit split between the D.C. Circuit and the Tenth Circuit
United States Court of Appeals for the Tenth Circuit
The United States Court of Appeals for the Tenth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* District of Colorado* District of Kansas...
.
Issue
Does the six-year statute of limitationsStatute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
for government actions for monetary damages in (a) govern the issuance of administrative payment orders, as opposed to the government's filing of a complaint in court?
Parties' arguments
BP contended that their broader interpretation of the statutory term "action" was supported by the reference to "every action for money damages" founded upon "any contract." They also argued that an MMS letter or payment order constituted a "complaint".The respondent relied on the language of the statute to argue that "action" meant an action in court, not an administrative proceeding.
Opinion of the Court
The court unanimously held that the statute of limitations did not apply to administrative actions. "Nothing in the language of § 2415(a) suggests that CongressUnited States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
intended these terms to apply more broadly to administrative proceedings. On the contrary, § 2415(a) distinguishes between judicial and administrative proceedings. Section 2415(a) provides that an 'action' must commence 'within one year after final decisions have been rendered in applicable administrative proceedings.' Thus, Congress knew how to identify administrative proceedings and manifestly had two separate concepts in mind when it enacted § 2415(a)."
Justice Alito further states that the situation is subject to the traditional rule quod nullum tempus occurrit regi
Nullum tempus occurrit regi
Nullum tempus occurrit regi , sometimes abbreviated nullum tempus, is a common law doctrine originally expressed by Bracton in his De legibus et consuetudinibus Angliae in the 1250s. It states that the crown is not subject to statute of limitations...
—time does not run against the King. "A corollary of this rule is that when the sovereign elects to subject itself to a statute of limitations, the sovereign is given the benefit of the doubt if the scope of the statute is ambiguous."
Recusals
Chief Justice Roberts and Justice Breyer did not participate in the decision. According to the Legal Times, "Roberts had ruled in the case in his former position as judge on the D.C. Circuit, and Breyer reported in his 2005 financial disclosure form that he owned between $15,001 and $50,000 in BP Amoco stock."See also
External links
- BP America Production Co. v. Burton at supremecourt.gov (docket information)
- full text (HTML with links to precedent, statutes, and U.S. Constitution)