In BHP America Petroleum Co. v. Burton, 549 U.S. — (2006), the Supreme Court resolved a legal issue that has been at the center of federal royalty litigation for twenty years: viz., whether 28 U.S.C. § 2415(a), which imposes a 6-year statute of limitations for Government “every action for money damages … founded upon any contract,” applies to administrative royalty payment orders issued by the Minerals Management Service (MMS). The Court held that it does not. Read more . . .
In 1996, MMS issued administrative payment orders to federal gas lessees that directed that oil royalties for the period 1989 to 1996 “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 Nations’ mainline pipelines.” The federal lessees appealed the MMS orders, not only challenging the merits of MMS’s royalty claim, but also arguing that the Government’s action was barred as to those royalties allegedly due more than six years before the MMS issued its order. Consistent with scores of prior Interior rulings, the Assistant Secretary of the Interior eventually denied the lessees’ appeal and held that the statute of limitations in section 2415(a) did not apply to administrative proceedings. On appeal, the D.C. Circuit held that section 2415(a) did not apply to administrative actions such as MMS’s royalty payment order. Amoco Production Co. v. Watson, 410 F.3d 722 (D.C. Cir. 2005). Because the Tenth Circuit had ruled to the contrary, see OXY USA, Inc. v. Babbitt, 268 F.3d 1001 (10th Cir. 2001) (en banc), the D.C. Circuit’s decision created a split in the circuits, which supplied the basis for the Supreme Court’s review.
The Supreme Court affirmed the D.C. Circuit’s decision, holding that section 2415(a) does not apply to administrative orders to pay royalties. The Court found the statutory text clear. Because section 2415(a) does not bar the Government’s action unless the “complaint” is filed more than six years after the right of action accrues or within one year after a final administrative decision has been rendered, the Court found that nothing in the text of section 2415(a) suggested that Congress intended the six-year statute of limitations to apply to administrative — as opposed to judicial — proceedings.
The Court similarly rejected the lessees’ argument that an administrative payment order constitutes a “complaint” for purposes of section 2415(a), finding that such orders lack the essential attributes of a “complaint” as that term is well-understood and well-defined in the law. The Court also found that the general rule that statutes of limitations are construed narrowly against the government erased all further doubts as to the meaning of section 2415(a).