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Fina Oil & Chemical Co. v. Norton

United States Court of Appeals for the District of Columbia Circuit
332 F.3d 672 (D.C. Cir. 2003)


Fina Oil & Chemical Co. (Fina) (plaintiff) was a lessee of federal land. Fina Natural Gas Company (FNGC) was a gas reseller controlled by Fina. FNGC was not a marketing affiliate of Fina, however, because it also bought gas from other, non-affiliated entities. When Fina sold gas to FNGC, it paid royalties based on its sale price to FNGC. The Secretary of the U.S. Department of Interior (DOI) (defendant), however, ruled that gas sold by Fina to FNGC should be valued on the basis of FNGC’s resale price. The pertinent DOI regulation stated that gas sold by a lessee of federal land to a non-marketing affiliate was valued on the basis of “gross proceeds accruing to the lessee pursuant to a sale under its non-arm’s length contract . . . provided that those gross proceeds are equivalent to the gross proceeds derived from [comparable sales in the same field or area]”. The DOI found the term “lessee” to include all affiliates of Fina, including FNGC. Thus, according to the DOI, Fina was required to calculate royalties based on the gross proceeds accruing to FNGC after the resale. The relevant statute defined “lessee” as “any person to whom the United States . . . issues a lease.” Fina brought suit, challenging the DOI’s interpretation of its regulation. The district court affirmed the DOI’s interpretation. Fina appealed.

Rule of Law


Holding and Reasoning (Tatel, J.)

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